Department of Labor’s Fiduciary Rule - What investors need to knowSubmitted by Durbin Bennett on September 26th, 2016
You have probably read about the U.S. Department of Labor’s (DOL)1 new fiduciary rule that will impact financial advisors and their clients. Simply stated, the DOL’s new “fiduciary duty” standard requires financial professionals who receive compensation for transactions to act in their client’s “best interest” when managing retirement accounts.
That means advisors must, for the first time, provide full transparency around the fees and commissions they charge for retirement plan advice and products. The same standard will not apply for non-retirement accounts such as individual, joint, trust, or business accounts. Durbin Bennett Private Wealth Management will continue to act as a fiduciary for all accounts we manage and relationships we have with clients.
Who Will Be Affected?
The DOL’s rule and related exemptions will require all retirement advisors, whether fee- or commission-based to adapt and practice a fiduciary standard that puts their clients’ best interests first and foremost. And retirement advisors have until 2018 to acclimate to this new fiduciary rule.
According to the National Law Review2, the final rules will likely impact broker-dealers the most, Registered Investment Advisors the least, and with insurance companies somewhere in the middle. “Record-keepers who have insurance companies or mutual fund manager affiliates will be impacted more than independent record-keepers. And, while not directly affected by the new rules, mutual fund management firms need to understand their impact, for example, the needs of broker-dealers in this new environment. At this point, though, it is impossible to know all of the repercussions. Stay tuned.”
A skeptical investor might ask: “If you weren’t always acting in my best interest, whose best interest were you acting in?”
Well, that’s a great question and the first one you should ask your financial advisor. You might also ask the following questions:
- As my financial advisor, will you do your best to evaluate my long-term goals and recommend investment ideas that put my interest above yours?
- In the course of our business relationship and because there are times when you may buy and sell investments for my portfolio, what is the range of fees and commissions you might receive?
- Do you a promise to act in my best interest on all matters related to advice and investment recommendations for my retirement portfolio?
- Why did it require a new law to be passed for you to act as a fiduciary and put me and my family first?
- Even though the law does not require it, will you also manage my non-retirement assets as a fiduciary or can you continue to put your interests above mine for those accounts?
- Do you or your firm have any potential conflicts of interest with decisions you might make on my behalf?
These six questions will undoubtedly lead to more questions and the more you are informed, the better off you’ll be. And while your advisor might ask you to sign new paperwork attesting to your understanding of this new fiduciary rule, remember the most important question of all: If you weren’t always acting in my best interest, whose best interest were you acting in?
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the gifting and estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. This material was partially developed and produced by Liberty Publishing to provide information on a topic that may be of interest. Copyright 2016 Liberty Publishing, Inc. All rights reserved.