Wouldn’t you want a financial adviser that was working in your best interests?
Well before last Friday, you may not have had such a person. You probably didn’t know that there were people advising you about how to invest for retirement who weren’t required to put your interests first. They could have been operating under a so-called “suitability” standard meaning they might have any number of conflicts of interest that were costing you a lot of money.
But on June 9, a new fiduciary rule went into effect. Under this rule, financial advisers have to put their clients’ interests first when giving advice about retirement accounts such as a 401(k).
Lots of folks took to Twitter with the hashtag #FiduciaryFriday to cheer the rule.
— Consumer Action (@consumeraction) June 9, 2017
— Financial Svcs Dems (@FSCDems) June 9, 2017
— Economic Policy Inst (@EconomicPolicy) June 9, 2017
Check out this tweet from Sen. Elizabeth Warren, a proponent of the rule. Watch the video.
For years, we’ve fought for a basic rule: retirement advisers should have to put their customers’ interests first. Today, that’s the law. pic.twitter.com/Kah1OnhjWn
— Elizabeth Warren (@SenWarren) June 9, 2017
But the fight to get this consumer protection isn’t over. President Trump and Labor Secretary Alexander Acosta aren’t fans of the rule. They are siding with critics – people who want to keep the status quo – that the rule will hurt smaller investors. As if they weren’t already being taken advantage of by unscrupulous financial professionals. Just read Bloomberg’s Ben Steverman’s recent look at the perils of hiring a planner: Why You Still Can’t Trust Your Financial Adviser
“The unique nature of the investing business makes it easier to exploit client ignorance. Investing is complicated, with sometimes intentionally impenetrable jargon, and customers must trust their advisers in the same way they trust their doctors: If an expert makes a recommendation, you tend to follow it, whether that means getting heart surgery or a variable annuity,” Steverman writes.
There are many good and trustworthy retirement advisers, but the industry has had too many loopholes for conflicts of interests. And now with the implementation of the fiduciary rule, some advisers are scaring clients making them believe the government is dictating how they should invest.
“Some financial firms and industry groups say the rule may have the unintended consequence of limiting savers’ options,” The Washington Post’s Jonnelle Marte wrote recently. “For example, some brokers may eliminate investment options with different fee structures that they fear will face more scrutiny under the rule, leaving customers with fewer choices.”
I’m already seeing this happen. This week I heard from several readers who are being told by their advisors that they have to change the way they are investing because of the fiduciary rule. It’s not true.
Read my column from yesterday about one such situation: The government’s new retirement rule may not stop your adviser from giving you bad advice
The fiduciary rule is an important consumer protection, and you need to know what this rule is all about and how it affects your retirement. Here’s some additional reading.
The rule “marks a major victory for consumer advocates, lawmakers and retirement groups who have been pushing for the regulation for more than six years,” Marte wrote.
Color of Money question of the week
What are your thoughts on the fiduciary rule and has a financial adviser talked to you about its impact on your retirement saving? Send your comments to email@example.com. Please include your name, city and state. In the subject line put “Fiduciary Rule.”
Live chat today
I’m live and taking your personal finance questions at noon (Eastern). The main theme for today is the new Department of Labor’s fiduciary rule. Joining me will be Barbara Roper, director of investor protection for the Consumer Federation of America (CFA). In more than 30 years at CFA, Roper has been a leading advocate of strengthened protections for individual investors, including by supporting the Department of Labor’s fiduciary rule for retirement investment advice.
Here’s the link to join the discussion.
Should you micromanage your teen’s summer job money?
How far should parents go in telling their teenagers how to spend their summer earnings?
Len Coris, president of Watermill Financial Group in Tucson, Ariz., wrote, “Summer earnings represent a great learning opportunity. Some should go into a Roth IRA. Some to a charity selected by the child.”
I couldn’t agree more.
Color of Money columns this week
Knowledge isn’t power. The right knowledge is power.
Stay informed about your money. Read and share my columns for this week.
— The government’s new retirement rule may not stop your adviser from giving you bad advice
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.