The Labor Department proposed new fiduciary rules for professionals handling retirement investments last year and these standards will go into effect next year despite many questions and pushback from some in the industry.
The New York Times notes that the new rules are designed to help those who assume that “the individuals and firms investing their money are operating under the same sort of ethical and legal standards as a family doctor — someone who is obliged to provide the very best advice.” Some consumers have been unaware that certain investment brokers were recommending financial products that provided the broker with greater commissions, even if there was a comparable product that would cost the consumer less.
Keep in mind that it is possible that subsequent administrations may alter or weaken these rules. So while some of us may be happy to see such rules in place, you cannot rely on the government to make sure that you are getting financial advice best suited to you. Remember, Fee-Only financial planners have always subscribed to the highest fiduciary standards.
While writing in The Washington Post about how he chose his financial planner, Bruce Horovitz says he did some things wrong. He admits to letting emotion sway his investment decisions; he even chose his financial advisor because she worked with a celebrity. He didn’t do enough research on his financial advisor but in the end, he feels he did the right thing because, “Over 15 years, she’s done me quite well — mostly by preventing me from doing all of the dumb things that I would have done on my own. That is the most compelling argument for hiring a financial planner.”
In an FAQ on “What New Rules for Retirement Mean for Investors,” The New York Times stated,
“You are still likely to get the purest advice from a financial planner who is paid a flat fee in which compensation is not tied to the sale of any one investment. Such advisers should be free to choose from a wide array of financial products.”