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Protecting Your IRA Without The Fiduciary Rule

Here’s the second article from dealing with the fiduciary rules –

Now that President Trump has rescinded the fiduciary rule, what exactly does that mean for IRA investors? The fiduciary rule, developed by the Obama administration, aimed to protect retirement savers from bad advice and keep more money in their pockets. It also sought to indirectly change the way the industry structures its products and advisor compensation policies.

Without the fiduciary rule, brokers who work under the suitability standard are required to make recommendations that are suitable for their clients, not those that are in their best interest. The belief is that some brokers make recommendations that pay them commissions rather than those that are best for their clients, supporters of the rule say. Whereas, under the fiduciary rules, broker-dealers would be required to act in their clients’ best interest rather than encouraging money moves that directly benefit the broker’s bottom line. Opponents of the fiduciary have held that if enacted, it would prove harmful to retirement investors with small accounts and limit their investment opportunities and investment advice opportunities.

At this time, the fiduciary rule has been rescinded, and won’t take effect, as originally planned, in April 2017. That means that brokers can still work under the suitability standard, and could still make recommendations that may not be as cost effective as under a best interest standard. For investors, they should continue to ask their financial advisor or broker about fees and make sure that they are actually speaking with a fiduciary and not a salesperson. Investors should also ask their financial advisor to provide them with a choice in similarly positioned investment products. For example, various mutual funds or exchange-traded funds from different providers could cover the same stock index, but may have different fee models. Investors should ask their broker for all relevant performance and fee information so that they can best decide which investments fit their financial needs. In addition, investors should ask their advisors how they are being paid so that they can make a well-informed decision about the investment. Just because the fiduciary rule was rescinded, does not mean the individual investor cannot try to replicate its goals. Individual IRA investors can, for example, seek out investment products that are not commissioned based. For example, over the past few years, more financial advisers have voluntarily adopted fee-only compensation models—such as charging a percentage of a clients’ assets under management—rather than accepting commissions. Merrill Lynch has said it would end commission-based retirement accounts and charge a fee based on a percentage of assets, even if the rule doesn’t survive. In addition, the robo-advisor market is quickly growing and it could offer small retirement savers access to cheap investment advice.

Even though President Trump has suspended the fiduciary rule, IRA investors can still take advantage of its intended benefits by taking on a more active role with their financial advisor.

For more information about the fiduciary rules, please contact us @ 800.472.0646.

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