Better Investor Protections Have Finally Arrived (But Will They Last?)
You may have heard that today, June 9th, the long-awaited Department of Labor’s (DOL) “Fiduciary Rule” goes into effect. Do you care? As an investor, you should. It’s probably the biggest thing to happen to brokerage industry regulations since the Securities Exchange Act of 1934.
Now, when your broker advises your employers’ company retirement plan or advises you on your IRA, they must put your interests ahead of their own.
Did you assume that was already the case? It wasn’t. Brokers have been held to the “suitability rule.” That meant expensive, commission-laden products could still be deemed acceptable as long as they suited your financial goals. To me, “good enough” is not enough for your life savings.
Today, the suitability rule is replaced by the considerably higher fiduciary standard … for retirement investing. Now, anyone offering you advice about your retirement assets must do so according to your best interests, regardless of any conflicting incentives or dual roles they may have.
I believe the new rule will drive down costs and improve the advice you receive. But watch out! First, the DOL does not have jurisdiction over your taxable, non-retirement accounts where the lesser, suitability rule still applies. Second, as you can imagine, many in the brokerage and insurance industries continue to lobby heavily against the rule, and the current Labor Secretary Alexander Acosta has vowed to “seek public comment on how to revise this [Fiduciary] rule.”
The Fat Lady has not yet sung in the theater of investors’ best interests.
Consider this: Since 1940, Registered Investment Advisor firms have been held to the highest fiduciary standard for all advice; no matter where your money is held. Brokers and insurance agents are now held to the fiduciary standard only for your retirement accounts – and even that’s not fully set in stone.
I’d like to think the playing field will someday be level, with fiduciary advice for all, all the time. Until then, watch out for when financial advice is in your best interest and when it’s suitably “good enough.”