President Obama announced a new proposal that would mandate investment brokers to act in the best interests of their clients rather than their pockets.

The president talked about his push for tighter regulations on advisers who handle 401(k) and IRA retirement plans during his trip to the headquarters of AARP in Washington, D.C., on Monday. According to him, the new law would help stop middle-class Americans from getting ripped off by their financial advisers.

"Because of bad advice, because of skewed incentives, because of a lack of protection, you could end up in a situation where you lose some of your hard-earned money simply because your adviser isn't required to put your interest first," Obama said, during his speech, reports ABC News. "The truth is, most people don't even realize it's happening."

However, because the new "fiduciary" rule would require certain brokers to put their client's interests ahead of their gains, it would likely cut into the fees that they received when they advise clients on 401(k)s and IRAs.

"When you have a broker who has their compensation directly tied to the advice they're giving to a person -- often with that person not knowing that that's the case -- they're going to ... have a big incentive to steer people [to products] that aren't necessarily in the best interest of the client but offer them the greatest compensation," said Jason Furman, chair of the White House's Council of Economic Advisers, according to the Huffington Post.

The White House noted their research shows, on average, hidden fees lead to one percentage point less in annual returns on a retirement plan. White House officials also said the Labor Department will release a detailed version of the proposed rule in the coming months. The new rule, however, is expected to affect IRAs more than 401(k)s since 401(k) plans already include an element of "fiduciary" responsibility, whereas IRAs do not.

Pamela Banks, senior policy counsel at the Consumers Union, also released a press release stating that the rule would help investors.

"These rules would help put consumers first by removing conflicts of interest among brokers and other financial retirement advisers, closing loopholes, and raising accountability for the industry," Banks said.

However, the law is being challenged by the financial industry, which is concerned the rule will trim broker pay and limit the financial products available to consumers.

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