'Fiduciary Rule' takes effect this week: See how it could affect your retirement
Posted June 7
When we put money away for retirement, most of us believe the person giving investment advice is acting in our best interest. That's not always the case, but a plan to require them to is set to take effect Friday.
It's called the Fiduciary Rule, a complicated name for a basic idea – when making investment recommendations, the person advising you on your retirement portfolio should make your bottom line their top priority.
"It's basically setting a higher standard. Commission-based advisers are only required to choose investments that are suitable for investments," Consumer Reports' money editor Tobie Stanger said. "They may be appropriate, but they could cost you a lot more in commissions and fees than if you had hired a fiduciary."
Experts estimate those fees and commission payments add up to $17 billion each year.
The new rule also cracks down on hidden fees and requires financial advisors to tell you about any special kickbacks they might receive for steering your investments in a certain direction.
President Trump ordered a review of the Obama Administration rule, which was originally planned to take effect in April.
"The reality is a lot of brokerages who expected this rule to go into effect already changed from commission-based to fee-based fiduciary's, but it's still worth asking, 'Are you a fiduciary?'" Stanger said.
If your advisor can't make that promise in writing, Consumer Reports recommends finding someone who can. Also, be aware that some brokers may tack on a "management fee" to make up for lost commissions.
"If the management fee is 1 percent or more of your assets, you probably can find a lower cost alternative," Stanger said.
As always, it's your money, and ultimately it's up to you to make sure you choose the best investments and advisor for your needs.
The Fiduciary Rule only affects advice on retirement accounts and insurance products that are used for retirement. It will be phased in over the next six months.