The Department of Labor presented a new rule this past week that will require financial advisors who are handling retirement accounts to begin acting as fiduciaries. This fiduciary rule will imply that the needs and interests of the clients, be given first priority.
What The Fiduciary Rule Means To You
There are some questions though regarding the fee structure and retirement savings that employees would like answered. Here, we try to analyze those questions:
a) If you are not a financial advisor, will your life change?
This is the first question that must pop up in minds of everyone involved. How will the new Fiduciary Rule impact me? The answer takes heed from the fact that the new rule is focused primarily on retirement savings. Having said that, any point of contact you might have with an IRA, 401(k), Thrift Savings Plan (TSP), etc. will be impacted.
b) Is your financial advisor a fiduciary?
All the financial advisors that have the following designations: Certified Financial Planner or Registered Investment Adviser, are in fact fiduciaries, by default. Depending on a percentage of your assets, they will typically charge you based on the assets you hold with their firm or possibly a set hourly or yearly fee.
The story is different however if you have an IRA at a Brokerage Firm and your major interaction is with a person who works with you as a Salesperson or who offers advice which is solely ‘Suitable’ (which is the vast majority of financial professionals) vs. that which is truly in the clients best interest, the answer can be a bit different.
c) Will money be saved?
Lastly, if you were making your deals with an advisor who works on commission the new Fiduciary Rule may end up helping you a great deal, but the new rule does not go into effect for at least a year from the writing of this article so we’ll see how much actual impact the final Rule actually has.
