Buzz
The Fiduciary Rule is inching closer to being completely dismantled, and this means your retirement planner can once again operate with less accountability, potentially leading to scams.
Though financial planners may object to the term, that’s essentially what they’re doing. Many planners are not required to act in your best interest—they just need to meet a 'suitability' standard. This allows them to recommend products that offer them a kickback, even if those products perform poorly or have higher fees. According to the White House’s Council on Economic Advisers, non-fiduciary advice costs retirement investors (that's you and me) $17 billion annually.
Do you know who *is* required to act in your best interest? Fiduciaries. There are many out there—you can find one [here]—and these advisors commit to putting you first. Examples include Certified Financial Planners (CFPs) and Registered Investment Advisors (RIAs). They don't receive kickbacks or tack on additional fees; their goal is to help you create a financial plan that truly serves *your* needs.
Naturally, the financial industry wasn’t thrilled. How could they keep making massive profits if they weren’t able to deceive average investors out of their retirement savings?
The Fiduciary Rule, introduced during the Obama Administration, would have mandated that all financial professionals—such as brokers and insurance agents—adhere to the 'fiduciary' standard. This would have meant that they must prioritize your best interests when offering advice on your retirement investments, ensuring your needs come before their own.
Of course, the financial industry wasn’t pleased. How could they keep raking in massive profits if they couldn’t deceive ordinary investors out of their retirement savings?
In response, Republicans delayed the rule’s implementation for nearly a year. Conveniently, 'fiduciary' is a term so dull and technical that most people overlook its significance, making it hard to stir public outrage. Recently, a federal appeals court decided that the Department of Labor exceeded its authority when creating the rule. The ruling did leave open the possibility for Congress or another authority to reinstate it, but with Republicans—especially House Speaker Paul Ryan, who called it 'good news for the economy'—celebrating, it’s unlikely to happen soon.
Republicans argue that the Fiduciary Rule would make it difficult for lower-income individuals to access financial planners. To translate that: it would have made it tougher for those with less money to be misled or poorly advised by planners who wouldn’t hesitate to drain their modest retirement savings, all while pretending to offer guidance. It's not exactly a solid argument.
Who else is bound by a fiduciary duty? Lawyers are a prime example. Would we be comfortable with lawyers breaking client-attorney privilege or cutting shady deals with the defense in exchange for a share of the client’s settlement, just because they charged the client a bit less upfront? No, right?
So what can you do? First, stay informed about what's happening. If possible, hire a 'fee-only' financial planner to guide your investment decisions. Also, push your state government to create its own version of the Fiduciary Rule. And maybe get a little fired up about it.
