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February 15, 2017
However, because you are reading this article, you are probably relatively engaged with your retirement accounts and may have less reason to worry.
There are a lot of things that Trump could do to harm your future security. But, if you are aware of the issues, then the DOL fiduciary rule (or lack of a fiduciary rule) does not necessarily need to be a significant concern.
That being said, you should know how to protect your finances and how to get the best financial advice possible.
Last April, the U.S. Labor Department issued a set of instructions to financial advisors. These rules were surprisingly simple and seem like they should be common sense. They required that any investment advice on retirement accounts be “fiduciary.” Fiduciary means that the advice is being given in the client’s best interest — not for the advisor’s benefit or financial gain.
In other words, the DOL fiduciary rule is designed to ensure that financial advisors are required to give advice that helps the client earn the best possible financial outcome. Advisors can NOT prioritize financial options based on the advisor earning higher commissions or fees.
Some advisors have always given financial advice to fiduciary standards.
In fact, many many people and institutions who offer financial advice on retirement accounts follow fiduciary standards — regardless of federal legislation.
The trick is in knowing the advisor’s credentials and motivations.
If an advisor holds a “Certified Financial Planner” designation, then the advice they offer falls within the fiduciary standard.
However, if you are getting financial advice from an advisor without that designation, your bank, your company’s 401k call center or elsewhere, it is much harder to determine if the advice is based on your interests or theirs.
Whether or not the DOL fiduciary rule takes effect, if you want unbiased financial advice, you need to do one thing: ask questions!
The first question you will want to ask is, “Are you a fiduciary?”
If the advisor answers no, you can still get good advice from them, but you will want to ask more questions — and ask those questions in different ways and at different points in the conversation:
As you can see, there are ways to watch out for your own best interests. However, it can be difficult to stay on top of it all. And, research suggests that it is the middle class who suffers without the DOL fiduciary rule.
According to a report by the Obama White House Council of Economic Advisers (CEA):
For example, a typical worker who receives conflicted advice when rolling over a 401(k) balance to an IRA at age 45 will lose an estimated 17% from her account by age 65.
“In other words, if a worker has $100,000 in retirement savings at age 45, without conflicted advice it would grow to an estimated $216,000 by age 65 adjusted for inflation, but if she receives conflicted advice it would only grow to $179,000—a loss of $37,000 or about 17%,” the White House explained in a statement.
Opponents of the DOL fiduciary rule argue that it makes it too difficult and expensive to offer financial advice.
A reputable online retirement planner can often help you avoid the pitfalls of compromised financial advice.
The NewRetirement retirement calculator is a comprehensive planning tool that lets you try out different scenarios and assess a wide range financial strategies on your own — beyond just investments.
Online resources like this one can:
The American Association of Individual Investors (AAII) named NewRetirement the best retirement calculator. Forbes Magazine calls it a new approach to retirement planning and users love this tool. Here is what a few recent planners have had to say:
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