Your Investment Adviser Has New Rules

by Amy Lignor

So, what is a fiduciary? It’s quite simple, really. A fiduciary is any person whose recommendations for buying or selling allocations are in the client’s best interest. They are the people out there who give you that ultimate advice when it comes to contributions, distributions, IRA’s, annuities, insurance policies, and so much more. They are also the people who take compensation for giving you all this spectacular advice. However, at one time the people who doled out this data were not all certified fiduciaries.

Now, let’s be honest, there are millions (okay, thousands) of investment professionals, advisers, etc., who are down to earth and as honest as honest can be. They want to sit down with you and your family to figure out the best investment plan possible. They want to set your finances up so that you will be able to pay for that home you want so badly, pay for the children’s college educations, and still (somehow) end up with enough money to retire on where you will be able to enjoy that fancy sports car and not just have enough money to pay for your own funeral expenses. After all, isn’t that what those “smart, educated” children are for?

But more and more people are becoming cynical when it comes to simply handing someone their money and saying: “Go invest this. Heck, I trust you.” There have been too many “schemes” and too many “evil ones” to make you step away from your cash and just hope the person you hired to invest it is one of the “best.”

Now you must throw into the mix the new “fiduciary rule” which was implemented just last week on June 9. It was probably difficult to even know about the rule considering all eyes were focused on this ‘FBI vs. Trump’ yapping. But, beginning now and rolling out in what the business world calls a graduated process that runs through Jan. 1, 2018, rules are being put into place as to how all investment professionals out there can now dole out advice to you, the consumer. This covers a menu of retirement funds, such as, IRAs, Roths, Health Savings Accounts and Coverdell Education Accounts.

This will not really touch anyone already using a CFP (Certified Financial Planner) for their financial needs. A CFP receives a standard fee, and has a one-on-one relationship with you. However, if you do not have a personal relationship with an adviser, but use a call-in center instead to allocate your IRA contributions, buy or sell stocks or make other changes to your investments, you should know that from here on out even though the people who answer the phone can still process your transaction, they can no longer help you decide what to do. They cannot dole out advice. Under the new rule, they can do what YOU want, but if you need or want advice or help to swim the shark-ridden business waters, you will need to search for your own personal adviser who gets paid a standard fee.

The second area that will be affected is if you are rolling over a 401(k) plan into an IRA. While this rule will not affect retirement plans already set up at your current job, if you change jobs and need a rollover, anyone who is going to advise you about moving those funds into an IRA will have to be a fiduciary.

This also comes into play when you are considering purchasing an annuity or life insurance plan. If you are using funds from a retirement plan, the person advising you about the transaction has to be a certified fiduciary. There are fee-only insurance advisers who are fiduciaries, if you want to make sure you are getting an independent take on such a major purchase. IRAs are being focused on the most, but there are other tax-advantaged retirement accounts that are covered by the new rule.

In the end, if you are unsure which accounts are changing and which advisers are supposed to be certified, ask questions, get information from independent consulting firms if need be, and always remember that there will be no government agency, such as the IRS that will be looking out for you, the consumer.

You have to make sure that your money is being properly taken care of – and by a person who is legally able to do just that – so that when retirement day arrives, you still have enough in the coffers to enjoy life.