Retirement advice: The fiduciary rule is finally here

“When a doctor prescribes a drug, most people trust that it is the best course of treatment,” said Tara Siegel Bernard in The New York Times. Now, your financial adviser will be held to the same standard—at least some of the time. The long-awaited fiduciary rule, which requires financial professionals to put their customers’ interests first when handling retirement accounts, went into partial effect earlier this month after being under review since 2015. Essentially, what this means is that financial advisers, including brokers and insurance agents, aren’t allowed to steer you toward investments that would earn them a higher commission if there is a better option available, such as a fund with lower fees. “The rule covers most retirement accounts, including individual retirement accounts and workplace accounts like 401(k)s and some 403(b) plans.” But for other investments, like traditional brokerage accounts and 529 college savings plans, “the old rules still apply.”

If you thought your financial adviser was already required to act in your best interest, “you’re not alone,” said Megan Leonhardt in Money.com. Nearly half of Americans wrongly believe that all advisers are already held to the fiduciary standard, according to a recent survey by financial tech firm Personal Capital. “That is indeed true for many financial planners who charge fees rather than commissions.” But until now, brokers working with retirement savings were held to the far laxer “suitability” standard, which allows advisers to make whatever recommendations they want as long as the offerings generally meet the client’s investment goals. So what can investors expect now? For starters, your brokerage may switch you from a commission-based account to an advisory account, “where you’ll pay a quarterly or annual fee for advice.” Your account statements also may look different, thanks to new rules requiring that fees be reasonable and transparent. Your new statement should show “a clearer breakdown of fees you’re paying both for funds and for advice.”

“Investors may not want to let their guard down just yet,” said Jonnelle Marte in The Washington Post. The fiduciary rule, a product of the Obama administration, has only barely survived multiple attempts by Congress to keep it from going into effect, and still faces fierce opposition from Republicans and the financial industry. And while the new obligations are now in effect, the Labor D epartment won’t begin enforcing them until Jan. 1, 2018. No matter what happens, “insist that any adviser you work with accept fiduciary responsibility,” said Mark Miller in Reuters.com. You can always ask your adviser to sign a fiduciary oath, “a legally enforceable contract that commits advisers to put your interests first.” If your adviser refuses, it might be time to hire someone else. ■