The Fiduciary Rule impacts anyone saving for retirement, and that should be all of us! Financial professional Brad Allen talks with Milwaukee’s WTMJ-4 about what this new rule means for investors.

Some financial professionals, including broker dealers, insurances salespersons and advisors, are only held to the “suitability standard,” which requires them to make investment recommendations that are suitable for their clients but not necessarily the best option. When the rule goes into effect, all financial professionals need to follow the “impartial conduct standard,” which requires advisors to charge only reasonable compensation, avoid misleading statements and provide advice that is in the best interest of the investor.

The Fiduciary Rule and related exemptions, is generally limited to advice concerning investments in IRAs, ERISA-covered plans, and other plans covered by section 4975 of the Internal Revenue Code. Financial advisors will now be required to direct you toward investments that are in your best interest. They have to put your needs ahead of their own profits. It ensures advisers adhere to fiduciary norms and basic standards of fair dealing. The standards specifically require advisers and financial institutions to:

  • Give advice that is in the “best interest” of the retirement investor. This best interest standard has two chief components: prudence and loyalty:
    — Under the prudence standard, the advice must meet a professional standard of care as specified in the text of the exemption;
    — Under the loyalty standard, the advice must be based on the interests of the customer, rather than the competing financial interest of the adviser or firm;
  • Charge no more than reasonable compensation; and
  • Make no misleading statements about investment transactions, compensation, and
    conflicts of interest.

As an investor saving for retirement, it is important to trust your financial advisor. Don’t be afraid to ask questions. Have a conversation with the advisor handling your money. Make sure you know what fees you are paying. They should disclose all fees to you and what those fees are for. Ask questions like, “Are you a fiduciary?” “How do you get paid for your services?” “Where do you keep your assets?” “What are your qualifications?” It’s also important to make sure you understand your investments. Take an inventory. Know what accounts and investments you have and how they are performing.

Take an inventory of your finances here.

Drake & Associates operates as fiduciary. Click here to watch a video and learn more.