Elder law attorneys, with expertise in estate planning, incapacity planning, and end-of-life care for seniors, are essential in working to protect a vulnerable population.
President Trump signed an executive order calling for a review of the so-called fiduciary rule, which was intended to prevent financial advisers from steering their clients to bad retirement investments by requiring advisers to act in the best interests of their clients. The order delays the rule, which was scheduled to go into effect in April 2017, and the rule may ultimately be repealed.
Prompted by concern that many financial advisers have a sales incentive to recommend to their clients bad retirement investments with high fees and low returns because they get higher commissions or other incentives, the Department of Labor drew up rules in April 2016 that would require financial advisers to act like fiduciaries.
The rule required all financial professionals who offer advice related to retirement savings to provide recommendations that are in a client’s best interest. Currently, financial advisers only have to recommend suitable investments, which means they can push products that may benefit them more than their clients. The rule would require advisers to not accept compensation or payments that would create a conflict unless they have an enforceable contract agreeing to put the client’s interest first. Advisers also would have to disclose any conflicts and charge reasonable compensation.
Americans likely lose about $17 billion from retirement savings every year because of bad financial advice from advisors with conflicts of interest, according to a 2015 report by the White House Council of Economic Advisors.
Even though the implementation of the rule is delayed and possibly scrapped for good, financial companies have already spent money and time to comply with the rule. For example, Merrill Lynch said it was going to stop offering commission-based retirement accounts in order to comply with the new rules. Those companies may not change course even if the rule is rescinded.
Regardless of whether the fiduciary rule lives on or not, consumers should use caution when selecting a financial adviser. Ask your financial adviser if he or she is a fiduciary. If not, then be aware that the adviser is not required to act in your best interest. You should also check your financial adviser’s experience and credentials and beware of phony credentials.