The so-called “Fiduciary Rule,” an Obama-administration set of regulations designed to protect retirement savers from potentially unscrupulous financial advisers, may not be exactly dead, but it appears to be on life support. That’s the conclusion we draw from a pair of articles that appeared in the national press in recent days.
The first article we encountered on the subject was this one from CNBC, called “Labor Department won’t enforce investor protection rule after court decision.” As CNBC reported, in mid-March the 5th Circuit Court of Appeals issued a ruling that said the Labor Department over-stepped its authority when it created the new standard which was supposed to have taken effect in 2017. Under the so-called Fiduciary Rule, says CNBC, “advisors and brokers [must] put their clients’ interests before their own when advising on retirement accounts such as 401(k) plans and individual retirement accounts.” As a result of this ruling setting aside the provisions of the Fiduciary Rule, a spokesman for the Labor Department told CNBC they will no longer be enforcing the provisions of the law, pending further review.
The CNBC report cites a 2015 study from the Obama-era Council of Economic Advisors that pegged the cost of “conflicted” economic advice at about $17 billion in retirement earnings annually. The Fiduciary Rule was supposed to cure these abuses by requiring financial advisers, investment counselors and similar professionals to act in their client’s best interests, not their own, and to clearly divulge any commissions or other sources of income that might cause them to give less-than-objective advice. There’s always a chance that some form of the Fiduciary Rule will survive all the legal scuffle, but as CNBC warns, consumers of financial services will need to show extra care in the future. “Regardless of what happens, experts recommend that retirement savers choose their advisors carefully and understand exactly how they are paid.”
To learn more about that aspect of the story – how savers need to beware – we turned to this article from one of America’s trusted sources, Consumer Reports. “If you want to make sure you’re getting the best retirement investing advice,” the magazine states, “you’re going to have to remain as vigilant as ever. [And] while the fiduciary rule appears dead for now, there are steps you can take to ensure that you get investment advice that’s free of conflicts of interest.” Consumer Reports says there’s good news in all this confusion, because there is now a growing market of investment-advice options that put small investors’ interests first.
Even with the regulation being suspended, says the magazine, financial consumers have still reaped some tangible benefits. “In response to the rule and to client demand for low-cost investments,” Consumer Reports says, “numerous large investment companies, including Fidelity Investments, Charles Schwab, and BlackRock, have reduced fees for retirement investors.” Others are moving toward a fiduciary standard, even shifting toward fee-based accounts, “because it makes business sense to do so.” The article cites moves by Bank of America and its Merrill Lynch Global Wealth Management division to replace some commission-based accounts with fee-based accounts. Other financial behemoths appear to be following suit.
Still, investors have to be wary of advisers steering them in a direction that means better returns for the adviser than for the client. “In light of the court’s decision,” Consumer Reports advises, “it’s more important than ever to know where your adviser and his or her employer stand on the topic of fiduciary duty. Some professionals—certified financial planners and registered investment advisers—have been acting as fiduciaries for years. But it’s always wise to ask a prospective adviser—or your current one—for written confirmation that he or she will act as your fiduciary. And if an adviser can’t assure you that he or she is a fiduciary, find one who can.” In any event, the idea of being a fiduciary, a concept which once meant little to consumers, is now gaining in importance. As Consumer Reports puts it, “Get used to bringing up the term ‘fiduciary’ to your current adviser or any new financial adviser you’re considering. And ask other salient questions as well.”
Many times on our AgingOptions radio program and in our seminars, we are asked about the best source of good, trustworthy financial advice. Our strong recommendation is to find a reputable fee-based financial adviser and to be extremely cautious when dealing with an adviser who makes his or her money when they sell you something, typically by commission. If you’ll contact us at AgingOptions, we can provide you with a list of advisers we trust and recommend. But there’s another point that we need to stress: financial planning and retirement planning are not the same. As important as it is to plan for your retirement finances, so that you’ll protect your assets and avoid burdening those you love, it’s far more important to plan holistically, making certain your medical needs, legal protection, and housing preferences are all part of the retirement blueprint. At the same time, your plan has to take your family communication into account, something all too many retirees overlook.
Is there a retirement plan that does all this? The answer is yes – a LifePlan from AgingOptions. We would love to share more about this truly comprehensive approach to retirement planning. Why not accept our invitation and join Rajiv Nagaich at a free LifePlanning Seminar near you? You can register online for the seminar of your choice by clicking here, or else you can contact our office during the week for assistance. We’ll look forward to hearing from you and answering your questions about the power of a LifePlan.
The road to a secure retirement is filled with twists and turns. Let the professionals at AgingOptions be your guide. Age on!
(originally reported at www.cnbc.com and www.consumerreports.org)