Should the financial professional helping guide your retirement investments act in your best interest?
A new fiduciary rule from the Department of Labor that was slated to take effect April 10 would require financial professionals to act in your best interest when providing retirement advice. This rule has been put on hold by President Trump.
Here’s one take on the issue by Benjamin P. Edwards, professor at Barry University School of Law: Financial advice is a thicket of conflicts. Wall Street wants to keep it that way.
And here’s an opinion in opposition of the rule: DOL’s fiduciary rule would ‘protect’ investors right out of the market
Last week, Lisa Bleier, managing director at SIFMA, and Cristina Martin Firvida, director of Financial Security and Consumer Affairs for AARP, answered questions from readers about the fiduciary rule during my online chat.
Here’s the transcript of the chat. It’s worth reading to get a pro and con perspective of the rule.
As is often the case when retirement is the issue, there were more questions than we had time to answer. Following are answers by Martin Firvida to some of the leftover questions.
Q: Is it constitutional for the federal government to force financial firms to enter into best interest contracts with their customers?
Martin Firvida: In a lawsuit brought by opponents of the rule in federal court, the claim was made that the Department of Labor was violating the First Amendment rights of advisers who want to give advice that is not in the best interest of their clients. The United States District Court for the Northern District of Texas rejected this claim, noting that the rule regulates professional conduct, not commercial speech. Four federal courts hearing various cases brought by the rule’s opponents have now issued decisions in favor of the rule.
Fiduciary rule authority
Q: SIFMA has said the SEC should pass a fiduciary standard that applies to all types of accounts. Does the SEC have authority to regulate accounts that include non-securities, such as fixed indexed annuities? Fixed indexed annuities are commonly recommended to investments and are often harmful products for investors
Martin Firvida: The SEC does not regulate fixed annuities. The SEC also does not regulate most indexed annuities. Variable annuities are securities and are regulated by the SEC.
We never regretted our rollover
Q: We did rollovers as soon as we retired. Our 401(k) wasn’t growing anywhere as much as our taxable investments. Had the company been with Vanguard we might have stayed. We actually have some taxable accounts with Vanguard but our financial adviser provided more information about the groups running our plan than the company did. What do you think?
Martin Firvida: Glad to hear your adviser was able to give you valuable advice! Under the Department of Labor rule requiring advice in your best interest, not the best interest of the adviser, rollover advice will be covered. This is REALLY important because, for many people, the decision to rollover their retirement savings may be the biggest one-time financial decision they will make.
Retirement rants & raves
This is your chance to rant and rave (or both) about any retirement issue.
Send your comments to email@example.com. Please include your name, city and state.
I loved this rave from Jeanne Furfari of East Kingston, N.H.: “What do I love about retirement? I answer to no one, except my conscience. I have no deadlines, except for those I choose. I am volunteering. I have run for office in my town and won! I enjoy time with my husband and my friends.
Furfari continued: “What do I wish I knew before I was laid off? I wanted to work until I was 70, so I was caught off guard at 66. I wish I knew more about Medicare and Social Security. I wish I knew how unimportant the income from a couple of years of stressed out working for a boss who made my life miserable really is. I can sleep. I have lost weight. I am healthier. I am happy. Most of all, I have rediscovered my husband.”
The Color of Money retirement coaches
You’ve got questions. I’ve got some people who are here to help.
Here two more experts I’ve added to the list of Color of Money coaches who will be helping me answer your retirement questions.
Robert Fishbein is a vice president and corporate counsel for Prudential Financial. He’s a retirement expert and a tax attorney and author on tax-wise retirement planning strategies, including maximizing retirement income through Social Security elections and tax diversification.
Jeanne Thompson is senior vice president at Fidelity Investments. She is responsible for “keeping her fingers on the pulse” of the retirement and financial wellness landscape, identifying and addressing trends, challenges and issues facing America’s retirement savers.
Live chat this week
Join me on Thursday, March 2 at noon (ET) for a live discussion about retirement savings.
Joining me will be Robert Fishbein, vice president and corporate counsel for Prudential Financial. Fishbein will be answering your retirement questions and talking about America Saves Week (Feb. 27 to March 4).
To participate in the discussion click this link.
Newsletter comments policy
Please note it is my personal policy to identify readers who respond to questions I ask in my newsletters. I find it encourages thoughtful and civil conversation. I want my newsletters to be a safe place to express your opinion. On sensitive matters or upon request, I’m happy to include a first name and last initial. But I prefer not to post anonymous comments (I do make exceptions when I’m asking questions that might reveal sensitive information that may cause discourse in a family or marriage).
Have a question about your finances? Michelle Singletary has a weekly live chat every Thursday at noon where she discusses financial dilemmas with readers. You can also write to Michelle directly by sending an email to firstname.lastname@example.org. Personal responses may not be possible, and comments or questions may be used in a future column, with the writer’s name, unless otherwise requested. To read more Color of Money columns, go here.