What is the new Fiduciary Rule and how does it affect the investor?

By now, you may have heard about the new Department of Labor (DOL) Fiduciary Rule.  It has been discussed in various media outlets, including TV and online.  It has certainly caused a lot of discussion in financial circles.  Let’s begin on the meaning of the word “fiduciary”.
Fiduciary is someone legally required to act in your best interest.  The DOL passed a new ruling, originally set to take effect April 10, 2017 but was delayed until June 9, 2017, to implement higher standards on investment professionals dealing with retirement accounts.  It may be a surprise to you, but up until now a financial professional was not legally required to act in your best interests.  This gap in ethical service continues on regular investment accounts.
You shouldn’t assume someone in the financial industry, a stockbroker or insurance agent for example, is acting as a fiduciary on your behalf.  Up until now, they have been held to a lower standard. One in which they were just required to provide you with advice or products that were “suitable” to your particular situation.  Lots of people offering financial advice are not fiduciaries. Fiduciaries will furnish you an ADV once a year.  An ADV is a form that discloses the adviser's education, fees, investment strategies, disciplinary actions (if any), and other information. Many insurance agents don’t reveal commissions they make when selling insurance products. Some will say clients don’t pay the commissions, that the insurance companies do.  This is very misleading.
Suitability is something that has been in place of the fiduciary standard up until now on retirement accounts. Suitability is only at the instant the product is sold. Fiduciary is an ongoing obligation. Financial planning looks and encompasses changes in people’s lives. College and estate planning, retirement, health and life insurance, long term care, and investments. You don’t make a one-time decision and then you are done. Things change. Kids, new job, retirement, divorce, marriage. Non-fiduciaries will not address any of this.
A fiduciary will constantly check to see if there are any circumstances that require change.
When dealing with a financial professional, ask to see their ADV and ask if they are fiduciary.
As a Registered Investment Adviser, I function as a fiduciary for my clients. Contact me for a meeting to see how I can help you and your loved ones, or visit my website www.federalretirementadvice.com for more information.

Popular posts from this blog

Financial Tips for Federal Employees & Retirees – January 2020

Financial Tips for Federal Employees & Retirees – October 2019

Financial Tips for Federal Employees - September 2019