It’s probably no surprise that Americans will lose close to $17 billion from retirement savings this year because of bad financial advice from advisers who put their personal interests before their clients’. Thankfully, the scope has changed for current and future investments.
As of June 9, 2017 a new rule is in effect that should prevent financial advisers from steering their clients into bad retirement investments. This means that all financial professionals who offer advice related to retirement savings must provide recommendations that are in a client’s best interest.
Until this rule was put into effect, financial advisers were only required to recommend suitable investments, which meant that they could push investments that benefited them over their clients. Thankfully, that’s no longer the case.
This rule also means that advisers can’t accept payments or compensation that create a conflict of interest unless a contract is in place that agrees to put the client’s interest first. All conflicts will have be to disclosed.
There are a few caveats here. This rule only applies to tax-advantaged retirement accounts like IRAs and 401(k)s. You should always use caution when selecting your financial adviser. This new rule compels advisers to act as a fiduciary on your behalf. This means that they are to treat you with the highest standard of care under the law. They should put your interest first, manage your finances carefully, keep your money separate from their own (and other individual’s investments), and keep solid records. Ask your financial adviser if they are serving as your fiduciary. If not, then your best interests may not be their priority. Always check their credentials and verify their experience. If you’re not sure how to spot phony credentials, here’s an excellent article that can help.
This federal rule is important and can change everything. Your retirement investments should always be maintained by those who have your best interests at heart. The more you know, the better prepared you’ll be to make the right decision.