| NEW YORK
NEW YORK Feb 8 Tired of the on-again-off-again
tease of a government rule that would make financial advisers
act in your best interest? No need to wait.
You have all the tools you need right now to enforce your
own fiduciary rule, simply by asking the right questions at the
right time and voting with your feet.
The system that guides financial advice was supposed to
change in April, when a long-debated set of instructions from
the U.S. Labor Department to financial advisers finally became
active. These rules require any professional dispensing
investment advice on retirement accounts to be what is known as
a fiduciary, acting in a client's best interest instead of
choosing the option that earns the most in commissions or fees.
Based on a memorandum that U.S. President Donald Trump
signed last week, that process is now up in the air. The April
start date might happen, a new rule might be offered, or we
could just continue with the status quo. (here)
The way it works today is that some financial advisers are
fiduciaries and some are not, and often it is hard to tell the
difference. An independent financial adviser with a certified
financial planner designation? Yes, a fiduciary, by definition.
The person at your bank who tells you what funds to buy with
your yearly IRA allocation? Probably not. The clerk at the call
center for your 401(k)? It depends.
If the idea of unconflicted investment advice sounds good to
you, then these are the key steps to follow to make sure you get
1. Know your adviser
Small investors do not often think it is worth their time or
money to hire an investment adviser and develop a relationship
(and neither do many advisers). But you can get to know an
First question: Are you a fiduciary?
If the answer is no, ask more questions about the person's
credentials, the fee structure and how else they earn their
money. You especially need to know if they get commissions for
pushing certain products like a specific family of mutual funds.
"Some people might not realize there are campaigns going on
to sell certain mutual funds. It could mean a trip, or some perk
of some sort. It's like a hidden compensation thing," says
Trisha Brambley, CEO of Retirement Playbook Inc. (rplaybook.com/),
a plan adviser to employers.
You can check out an individual adviser's records on
BrokerCheck (brokercheck.finra.org/), run by the
financial regulatory agency Finra.
Another tip: If you are over 59-1/2 and can take money out
of retirement accounts without penalty, an adviser might try to
steer you toward investing that money privately rather than
keeping it in a 401(k). That broker may just be looking to boost
his or her commissions, warns Brambley.
2. Know the fees
Fees have gotten more transparent in recent years, with the
numbers showing up on your annual statements, but there is still
a lot that people miss.
"Unlike any other service, you don't pay a check for it,"
says Mitch Tuchman, CEO of Rebalance IRA (www.rebalance-ira.com/),
a low-fee investment adviser.
If people got invoices yearly from a mutual fund company for
thousands of dollars, they would ask more questions. But
instead, the fees get sucked out in tiny increments every day,
and while you never see it, it can add up.
Tuchman's company recently advised a client in his 60s who
had $400,000 in an account at a large bank. He was paying 2.7
percent in fees, which amounted to about $10,800 a year. The
client needed to be shown these hard numbers in order to see
that putting his money in low-cost index funds, with fees at 0.6
percent or about $2,800 a year, was a much better deal.
3. Vote with your feet
The easiest step: If you want a fiduciary, get a fiduciary.
It does not have to be more expensive or inconvenient. It is
just a choice.
No matter what happens with the fiduciary rule and its
implementation, the option to hire one exists. You can even ask
a non-fiduciary to sign a fiduciary pledge, although some will
not be able to because of their employer's restrictions.
"Consumers just need to be aware," says Tuchman. "Anyone
smart enough to save some money is smart enough to ask the right
(Editing by Lauren Young and David Gregorio)