This is a good article we wanted to share on the reasons why you do want to choose a fee-only fiduciary planner. Enjoy!
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Fiduciary rule: Key steps to protect yourself from a bad financial adviser
Adam Shell- USA Today
The next time you visit your financial adviser, it’s important to ask if they’re managing your retirement money with your “best interests” at heart, rather than their own.
Indeed, the burden of looking out for how your money is invested and what fees and commissions you pay an adviser or broker appears to be shifting back to you.
This buyer-beware atmosphere follows a federal court ruling late Thursday that struck down a rule created in 2016 by the Obama administration. That consumer-protection rule required financial pros to act as “fiduciaries,” meaning they must look out for your financial well-being, just as a doctor would your health or a lawyer your legal affairs.
The Labor Department’s so-called “fiduciary rule” — also dubbed the “conflict-of-interest rule” — forced financial professionals to put their clients’ financial interests ahead of their own. In layman’s terms, the retirement funds and products an adviser steers you toward must not only be “suitable” for your needs but also low-cost — rather than mainly for the purpose of generating a higher commission or fees for the adviser.
But Thursday’s ruling by the U.S. Court of Appeals for the Fifth Circuit clouds the future of the fiduciary rule. It’s possible the Labor Department could ask the court to revisit its decision or ask the Supreme Court to hear the case, says Andrea Coombes, investing and retirement specialist at NerdWallet.com, an online personal finance site.
“The ruling is bad for investors because it means investors will get conflicted advice,” says Heidi Shierholz, senior economist at the Economic Policy Institute, a non-partisan, non-profit think tank. “It means that retirement investors are at risk of having their advisers legally steer them into investments that are not good for them.”
Opponents of the rule argue that it was overly burdensome and, as a result, that it would end up resulting in higher, not lower, costs for investment advice.
Investors who act on advice of financial professionals not working in their best interests will lose an estimated $1.9 billion a month, or roughly $23 billion a years, Shierholz says, citing the ECI’s latest analysis.
Here’s an example: An adviser sells you a fund that invests in large-company U.S. stocks charging a sales fee of, say, 1% or 2%. But what you aren’t told is that there are similar products he can offer you with lower fees, says Alexander Assaley, managing principal of retirement plans at AFS 401(k) Retirement Services in Bethesda, Md.
Here are key steps to take with financial advisers if the court ruling stays in place and the “fiduciary rule” goes away:
Request a ‘fiduciary’ relationship
Now’s the time to make sure your financial professional is working for you. Beef up the vetting process.
“Before you hire an adviser, ask whether he or she is a fiduciary, which means the adviser will work on your behalf, ” Coombes says. “You want that extra layer of protection.”
A non-fiduciary is only bound by a “suitability” standard, which means they can steer you into “high-priced” investments just as long as they are “suitable” to your investment needs.
Ask the tough questions
When considering a new financial adviser, you have to ask the tough questions, says Jon Stein , CEO of Betterment, the online automated investment service. Says Stein: “Consider asking: Who makes money from my account, and how much? Do you make more money recommending some investments over others? Are you committed to acting in my best interests for all my accounts, at all times?”
If you don’t get the answers you want, “it’s okay to walk away,” he adds.
Get a second opinion
If you’re not sure about the funds or fees your first-choice adviser is proposing, take the time to go to another financial professional to make sure the advice you received is really in your best interest, says Justin Fort, president of retirement planning at Fort Wealth Management, based in Austin.
“Don’t be afraid to get a second opinion,” Fort says.