Ready, set, go: Retirement advice protections are here

CHICAGO (Reuters) - Friday is the day, folks.

A pair of elderly couples view the ocean and waves along the beach in La Jolla, California March 8, 2012. REUTERS/Mike Blake

Starting on June 9, all financial advisers providing guidance on retirement accounts must adhere to the new U.S. Department of Labor rule requiring that they act in your best interest rather than their own.

The controversial rule survived a bruising seven-year battle against entrenched interests in the financial services industry, which were seeking to protect excess fees that cost retirement savers $17 billion a year - a full percentage point in annual returns, according to U.S. government estimates during the Obama administration.

Most recently, the rule survived a 60-day delay by the new administration under President Donald Trump, which has considered repealing or revising it.

The Trump administration may yet try to weaken or undo parts of the so-called fiduciary standard, and several important parts of the rule are due for completion in January. These include details on adviser exemptions and disclosures that must be made to consumers.

For now, the rule has teeth. It permits consumers to sue advisers if they do not think they have met their fiduciary obligations.

What will the rule mean for retirement savers, and how can you take advantage of its protections? The following are some key issues to consider:


The fiduciary rule imposes requirements on advisers who were previously not required to act in clients’ best interest.

If you are surprised to learn that all advisers were not already required to do this, you are not alone. A survey released in April by Financial Engines, which advises workplace savers, found that 53 percent of Americans mistakenly thought that all financial advisers already adhered to a best interest standard.

Registered Investment Advisers (RIAs) are already fiduciaries; now broker-dealers and insurance company representatives will have to act in your best interest whenever tax-advantaged retirement accounts are involved. Previously, they were governed by a far weaker “suitability” standard that allowed them to sell higher-cost products that might otherwise fit your investment goals.


If you already work with an adviser, expect to receive a contract spelling out that the relationship is now governed by the new rule and specifying that advice will be in your best interest, costs will be no more than reasonable and that no misleading statements are permitted.

The rule is limited to tax-advantaged retirement accounts - such as IRAs and 401(k) accounts - including rollovers from workplace plans to IRAs.

But do not stop there. Insist that any adviser you work with accepts fiduciary responsibility.

An easy way to separate wheat from chaff is by asking an adviser to sign the Committee's fiduciary oath, a legally enforceable contract that commits advisers to put your interests first. (To download the fiduciary oath, click: here)

Scott Puritz, managing director of Rebalance IRA, a low-fee fiduciary advisory firm that manages retirement investments, recommends requiring any prospective adviser to provide a detailed accounting of all expenses applied to your retirement accounts, including adviser, fund, marketing and distribution and transaction costs.

Also request a detailed accounting of any one-time expenses, such as front-end loads on mutual funds plus exit or surrender penalties. You also want full disclosure of any conflicts of interest that an adviser may have that could impact her advice to you.


Finally, ask for a copy of the firm’s U.S. Securities and Exchange Commission Form ADV Part 2, which requires brokers to disclose the types of services provided, fee schedules, disciplinary information and any conflicts of interest.

It is also important to conduct a thorough background check on anyone you intend to hire, advises Kate McBride, former chair of The Committee for the Fiduciary Standard, a group of industry practitioners and experts.

Do a search of FINRA's Brokercheck database (, and a Google search for news on the adviser’s firm.

“Be on the lookout for firms that have paid big fines in the past five years for wrongdoing or over-charging,” McBride says. “If there are more than a handful of cases, think carefully about whether you want to use that firm.”

The Pittsburgh-based Centre for Fiduciary Excellence maintains a database of roughly 200 vetted fiduciary advisory firms around the United States that have subjected themselves to extensive audits of their investment practices and client files. (To access the free database, click here: here)

“People will spend more time looking for a contractor to fix their sinks than they do hiring an adviser,” McBride adds. “You have to do your homework.”

(The opinions expressed here are those of the author, a columnist for Reuters.)

Editing by Lauren Young and G Crosse