The term Fiduciary is defined as: “A person who holds a legal or ethical relationship of trust with one or more parties.”
This was the aim of the DOL’s “Fiduciary Rule”, which aimed to standardize the way retirement brokers and advisors interacted with clients.
The rule was originally scheduled to phase in over the course of 2018 and would have required advisors who work with retirement plans or who provide retirement planning advice to disclose all details of fees and commissions to their clients in dollar form.
Ultimately, lawsuits and complaints from various sources caused the DOL to postpone the rule and recently the 5th Circuit Court of Appeals voted to vacate the law entirely.
(Note that this is different from the “Fiduciary standard”, which applies more broadly to all advisory services, is enforced by the SEC, and is still very much in effect.)
Now, it would seem that any advisor acting in their client’s best interest would have no issue with disclosing this information to the clients they serve. This perhaps exposes the truth of the matter, that many advisory services handling retirement accounts believe their businesses would suffer if they were forced to disclose detailed information about how they earn money from their clients.
Now, the Fiduciary Rule would have essentially made it illegal to recommend certain services and insurances to clients with costs that outweigh their benefits. Without the rule, brokers and advisors who handle retirement accounts are more or less free to offer expensive options that they know aren’t necessarily the best choice for the client. They’re also free to accept big kickbacks in exchange for these sales.
Fortunately, this whole debacle does have a silver lining. The abandonment of the DOL’s Fiduciary rule has put the whole issue into the spotlight in recent months, and that means that many advisors are taking notice.
The rule itself made the whole issue of Fiduciary standards a mainstream talking point, so if you ask a potential retirement advisor if they adhere to fiduciary standards, they’re likely to know exactly what you mean, and be able to give you an answer that will give you a good indication of how they run their business.
If you already employ a retirement advisor, now is probably a good time to bring this up to them and see how they respond. Many trustworthy advisors will have no issues plainly showing you how they handle fees and commissions.
If you’re seeking out a new advisor, there’s an easy way to bypass the issue entirely – hire a Registered Investment Advisor or RIA. RIA’s are held to the SEC’s Fiduciary standard, which is almost functionally identical to the rule the DOL was trying to implement.
As long as you can locate an RIA that handles retirement accounts, you shouldn’t have anything to worry about. These advisors are required to place your financial interest before their own, and hawking unnecessary and expensive services and insurances to you is against regulation.
If you need any assistance in finding an RIA to handle your retirement account, or if you contact your existing advisor and find their response to questions about fiduciary rules troubling, feel free to schedule a call with one of our advisors.
We can help you with any questions you have about the finer details of Fiduciaries and retirement advisor services.
We even have RIA’s available to handle your accounts to the Fiduciary standard, if you’re interested in a one-stop solution, although you’re free to call in and ask questions without making any sort of commitment.
Click here now to see available call times.
As always, invest wisely.
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