The New Fiduciary Duty Rule Governing Retirement Accounts

While it has been argued by investor advocates for a long time that a fiduciary duty applies to those individuals that give investment advice to others, the Department of Labor (DOL) finally put the issue to rest with respect to retirement accounts.  After six years in the making, the DOL put forth a rule that redefines who is a retirement investment advice fiduciary.  The rule is designed to protect investors who obtain investment advice for retirement accounts from stockbrokers, insurance agents and other types of financial advisor who “put their own profits ahead of their clients’ best interest.”  Several provisions of the rule are expected to take effect April 2017 with full compliance required by January 1, 2018.

Under the rule any person that is paid to give advice to a plan sponsor (e.g., an employer with a retirement plan), plan participant or IRA owner is now to be considered a fiduciary.  The fiduciary standard would also apply to advisors that provide advice as to whether to rollover money from an employer-sponsored retirement plan (e.g., 401(k)) to an IRA.  The new rule is meant to do away with possible conflict of interests by increasing fee disclosures and requiring the investment adviser to always put the investors’ best interest first.  Previously, a financial advisor’s recommendation was only required to be “suitable” meaning that if there were a couple of products that fit the investor’s investment objectives and risk tolerance, the advisor could pick the one with the higher commissions and fees which would lower the possible return instead of what was in the best interest of the investor.

Legal challenges to the rule from the Securities Industry are expected.  However, according to several news stories the DOL is confident that the new rule will survive legal challenges

Contact an Attorney

If you feel uneasy about your retirement account or believe you have been mistreated by your financial advisor, contact the securities lawyers at Silver Law Group, a national Securities Arbitration & Investment Fraud Law firm. Their lawyers are admitted to practice in New York and Florida and represent investors nationwide to help recover investment losses due to security and investment fraud or stockbroker misconduct. The securities lawyers at Silver Law Group work hard to protect your money from the bad guys. Contact us at 800-975-4345.