Fran Schuber was 83 years old when her boyfriend introduced her to insurance agent Glenn Neasham. Schuber wanted to diversify her retirement savings portfolio, and Neasham had just the investment for her: an indexed annuity. The upside: The product offered tax-deferred earnings and a nice return. The downside: Schuber couldn’t withdraw more than 10 percent of the investment annually for 10 years without facing penalties.

For younger investors, such a niche product might be a good deal. For Schuber, who was in her early eighties and suffering dementia — as Neasham would later discover — it hardly made sense. In fact, the sale was unusual enough for a California court to find Neasham, who collected more than $10,000 in commissions, guilty of theft. An appeals court overturned the decision in 2013, arguing there was no evidence Neasham had misled or taken directly from Schuber, who is since deceased. 

Neasham maintains his sale was appropriate. But the law in such cases is less than clear. Broadly, what obligations do those dispensing retirement advice have to their clients?

“The vast majority of advice offered by brokers is not subject to meet the best interest of their clients,” says Barbara Roper, of the Consumer Federation of America.

The problem, consumer advocates argue, is a misalignment of incentives. Most retirement advisers are allowed to put their own profit ahead of clients’ bottom lines. This stands in contrast to pension fund custodians, who are required by law to abide by the fiduciary standard – that is, they must act in the best interest of their clients.

But brokers also reap commissions when they sell certain investments. Such “conflicted advice” leads advisers all over the country to load middle-income savers with costly, fee-laden investments. Over the past few decades, the arrangement has sent hundreds of billions of dollars in American retirement savings flowing into the pockets of commission-hungry brokers and Wall Street banks.

For Americans cumulatively holding some $10 trillion in retirement assets, the effects of conflicted-interest advising are far-reaching. According to a new white paper from the White House’s Council of Economic Advisors, the annual cost of these nicks and cuts amounts to some $17 billion – though it could be as much as $33 billion.

The research is particularly troubling in light of the growing number of Americans who have saved too little to retire comfortably. The shortfall in U.S. retirement savings has ballooned to more than $7 trillion. The average working household has essentially no retirement savings.

Brokerages, insurance giants and advisors at Wall Street firms like Wells Fargo and Morgan Stanley follow the so-called suitability standard, which prevents against egregiously bad advice.

“Funds that have poor performance and high costs still get sold because they make higher payments to brokers,” says Roper. A broker advising a recent retiree, for instance, could have a choice between two investment options to offer: One charges a hefty fee and pays the broker a commission, while the other has minimal fee and no commission.

Research shows that even a small payout for the broker is enough to make her push the pricier investment. “Brokers are able to recommend products that pay them more and you less,” says Lisa Donner of Americans for Financial Reform, a Wall Street watchdog organization.

It’s not just high-earners sitting on fat million-dollar retirement cushions who are affected. “The less money you have, the higher the expenses per dollar you invest,” says Sheryl Garrett, a financial planner who runs a national network of retirement advisors. Often, that means brokers offer riskier assets with higher fees to savers with modest incomes.

“For most financial advisers to spend any time or energy on you, they want to make sure they’re going to get some reward.”

A Shrinking Nest Egg

A new coalition of advocacy groups is now trying to raise broader public awareness of the issue, which has long been seen as the province of stodgy personal finance scolds.

The coalition – which includes the AARP, watchdogs like Better Markets, and organized labor – has friends in high places. The Department of Labor, which oversees issues related to pensions and retirement, has announced it will revisit the rules that compel financial advisers to act in the best interest of clients. Earlier this week the White House joined the effort.  

“You want to give financial advice, you’ve got to put your clients' interests first,” Obama said. “If your business model rests on bilking hard-working Americans out of their retirement money, then you shouldn’t be in business.”

Opposing the proposed rule change is a range of financial industry groups, led by Wall Street’s powerful Securities Industry and Financial Markets Association (SIFMA). When reached for comment, SIFMA provided a release warning the proposed rule “could limit investor choice, cause inconsistencies as different regulators would apply different standards to the same retirement accounts, prohibit access to investor guidance, and raise the costs of saving for retirement.”

Large advisory firms did not respond to requests for comment.

Industry groups argue that brokers fully disclose fees and commissions to investors. But advisors who abide by a fiduciary standard say savers are largely oblivious.

“The client never really sees those fees,” says Andrew Sloan, an investment adviser with Bluegrass Financial Planning in Louisville, Kentucky. As a certified fiduciary and “fee-only” advisor, Sloan earns no commissions and must act in his clients’ best interest.

Like other fiduciary advisors International Business Times spoke with, Sloan says clients regularly come to him with portfolios loaded with fees. “When I show them what they’re paying, it’s shocking to them,” he says. “A tremendous amount of their nest egg is being paid out to brokers.”

Over several decades, seemingly minor fees can snowball into major losses. Conflicted investments carry expenses of an additional 1 percent above the average fee, according to multiple studies cited by the administration white paper. For a fund with returns of 6 percent annually, that tiny cut ends up consuming nearly a third of the investment’s value over 40 years.

In other words, what could have been $100,000 is now just $68,000.

"A Wild West Of Financial Specialists"

American workers didn’t always have to worry that their retirement advisers weren't legally bound to serve their interests. The current rules governing retirement savings were drafted in the 1970s. At the time, over two-thirds of Americans collected pensions, which are covered by fiduciary duty standards.

But a tidal shift toward other, less protected investment vehicles, which now make up more than half of retirement assets, has changed the game.

“There is now this Wild West of financial and retirement specialists,” says Garrett. Thousands of investment options create a bewildering terrain for investors, who tend to lack the financial acumen of professionals who hawk everything from mutual funds to variable annuities – whose fees can exceed 5 percent.

Expenses are mounting even for large employer-sponsored plans subject to fiduciary standards. The Supreme Court this week heard arguments in a class-action case surrounding allegedly excessive fees for employees at Edison, an energy company.

As the AARP has found, people saving for retirement are poorly informed about expenses lurking in their contracts. Over 70 percent of respondents to one AARP survey weren't aware they were paying any 401(k) fees.

But a growing contingent of baby boomers reaching retirement are noticing something amiss. “There’s a certain point in time where they say, ‘Gee, the market’s going up, but my account is not going up,’” says Tony D’Amico, a Cleveland-area financial advisor who says he regularly gets new clients who are paying upwards of 6 percent fees on variable annuities. “They knew something was going on, but they didn’t know what.”

The rules being bandied about at the Department of Labor could mean the next generation of future retirees has less to fear in the advice they receive.

But D’Amico still has his doubts. The proposal would expand the fiduciary duty standard but still allow some advisers to collect commissions. “Consumers are confused enough already,” D’Amico says. “They’re amazed that they can go to a financial planner and get both commission-driven investments and fee-driven investments.”

From what administration officials have indicated, the new rules wouldn’t fundamentally change this conflict. “Commissions have their place for the right type of strategy,” D’Amico says. But for retirement savings advice? “How you reconcile that is hard.”

CORRECTION May 11, 2016:​ This story has been corrected to note that Schuber approached Neasham, not the other way around. The amended story also clarifies that Schuber could withdraw up to 10 percent of her investment a year from the annuity.