President Trump recently signed an executive order seeking a review of the so-called fiduciary rule which was an Obama-era rule that would have required financial professionals to act in customers’ “best interest” when giving them advice about their retirement accounts. The so-called fiduciary rule has been the subject of years of intense debate and was set to take effect in April 2017. It is now unclear whether the rule will ever take effect.
Doesn’t your investment professional already have to act in your best interest? Not necessarily. A financial planner or investment adviser in a stand-alone firm may be required or voluntarily pledge to act in your best interest. However, some stockbrokers and many who sell life insurance, annuities and other more esoteric investment products merely have to follow the “suitability” standard.
What does this mean for you? As always, buyer beware. You should always check the background of any financial professional who wants to do business with you. Look up their name on the internet, get references, and check out any disciplinary records on Finra’s BrokerCheck website. Most importantly, ask your financial professional if they follow the fiduciary or suitability rule and ask how their compensation works. Are they paid commission only, commission plus fees, salary plus bonuses, or fee-only basis? Like selecting a good doctor, you want to work with competent financial professionals to ensure your financial health.
-Stephanie Bivens, JD, CELA