The Wall Street Journal covered an ongoing controversy about a proposed policy shift in its Financial Adviser blog on April 23.

The U.S. Department of Labor has proposed rules – advanced by Professor Norman Stein – that would define anyone providing financial advice to retirement plans and individual retirement savers as fiduciaries who must put their clients’ interests first.

Stein said the Labor Department was permitted to set rules for workplace retirement plans under a “peace treaty” worked out between the Labor and Treasury departments in 1978, following passage of the Employee Retirement Income Security Act.  The Internal Revenue Service, a division of the Treasury department, has historically set rules that apply to individual retirement accounts, or IRAs.

With increased numbers of retirees putting aside funds in IRAs, Stein and other pension-rights advocates have called for all financial advisers who counsel retirement plans or individual retirement savers to be defined as fiduciaries to discourage them from steering clients toward high-fee investments.  

Stein has testified before Congress in favor of the policy change and accompanied students from his Employee Benefits Law classes to speak on the matter at administrative hearings in Washington, D.C.

A spokeswoman for the brokerage industry told the Journal that it would be preferable for the Securities and Exchange Commission to set new standards for financial advisers that would apply to retirement and non-retirement accounts.