Scott Pritchard | Principal

We finally have a new Fiduciary Rule that becomes the law of the land next year on April 10, 2017. Now what?

Unfortunately, as many cynics (and perhaps some realists) predicted, the final rule became the victim of Wall Street and insurance industry lobbyists.

Yes, the concept of requiring anyone providing investment advice to a 401(k) participant or IRA investor to put the investor’s interests ahead of their own remains, but the loopholes included in the final rule mean that it will be mostly business as usual.

Yes, brokers may migrate to fee-based accounts and away from commission-based accounts where they have historically been compensated more for recommending Fund A over Fund B, even though Fund B would have been better for the investor.

Yes, those same brokers may have to give up their “incentive trips” to the Bahamas for selling the most retirement plans or opening the most IRAs.

But will the average 401(k) participant be better served? Will the retiree seeking help with their rollover be more confident that they’re getting the right advice?

Just as before, the answer is “It depends”. The new Fiduciary Rule is well-intended, but every employer that offers a retirement plan and every individual with an IRA will still have to ask the same basic questions of their current or prospective advisor:

  1. How much experience do you have helping others in my same situation?
  2. Are there any conflicts of interest with your advice?
  3. How are you compensated?

The answers to those questions will go much further than any new rule in helping employers and individual investors separate the wheat from the chaff when seeking investment advice.