Do you rely on the help of a financial advisor for your retirement fund? If you do, or plan to in the future, then here’s something to keep in mind:
One of the major legislative changes that may impact your retirement fund this year is the DOL Fiduciary Rule. If you have a retirement savings account, or intend on starting one soon, it is important that you know what this law is, how it can impact you and what legal changes are on the horizon. At Grantham, we want you to have the knowledge and tools to build your future and finances, so we’ve answered seven questions you need to know about the new law.
1. What is a Fiduciary?
It sounds complex, but it’s actually quite simple. A fiduciary is a person a you trust to make important decisions on your behalf.1 As it relates to the DOL Fiduciary Rule, a fiduciary is a person who is legally required to give you financial advice that serves your best interests — not their own interests.2
2. So a Fiduciary is Just a Financial Advisor … right?
Not necessarily. It may come as a surprise, but not every financial advisor is legally required to give you financial advice that is in your best interest. The only people legally required to do this are Registered Investment Advisors (RIA). Other professionals — like stock brokers, wealth managers and financial consultants — are not required to do so.2
3. What is the Fiduciary Law?
The fiduciary rule is a law crafted by the Obama Administration that is designed to protect retirement accounts from bad financial advice.3 Under this new law, stock brokers and wealth managers will no longer be able to give financial advice that is bad for you … not without legal consequences, at least.
Under the new law, every single financial advisor, not just RIA’s, will be forced to disclose important information like hidden fees, revenue shares and conflicts of interests. It is set to begin on April 10, 2017.4
4. What Do I Need to Know About Upcoming Legislation?
Even though the fiduciary rule is scheduled to take effect April 10, there is still a possibility that it could be delayed or completely blocked. Currently, the Trump administration is reviewing the law, which means the implementation of the DOL Fiduciary Rule may be postponed by 180 days.5
5. How Might the Law Impact My Retirement Money?
According to a report released by the White House, Americans lose $17 billion worth of investments per year due to bad financial advice.4 That’s right, $17 billion lost every year. In addition, a retiree who receives conflicting advice when rolling over a 401(k) balance to an IRA will lose about 12% of their savings over 30 years.4
So how might the law impact your retirement fund? Well, if you have been unknowingly receiving bad advice from your financial advisor, it could help you save a significant amount of money.
6. It Sounds Helpful – But is There a Catch?
Skeptics worry that the law will increase the cost of good financial advice and limit the type of financial advice you can receive. Many think this law could also cause small businesses to close or merge due to the high cost of regulations.6
7. How Might the DOL Fiduciary Rule Impact My Relationship with My Financial Advisor?
If you pay a flat-rate fee instead of commission, or if your financial advisor is already legally a fiduciary, then your relationship likely won’t change much, although there could be some slight changes in fees.7
However, if you are currently being charged based on commission or are not seeking advice from a legal fiduciary, then you will likely get a new contract in the mail letting you know about any hidden fees or conflicts of interest and assuring you that they will now work in your best interest.7
Learn More About Financial Advising Through Grantham University’s Financial Planning Program
Getting the best advice possible about your retirement fund may seem challenging, especially when laws change. However, at Grantham, we want you to make informed financial decisions that will help your future. If you want to learn more about financial advising, then contact Grantham today to get more information about starting your career as a financial planner with a Grantham University education.
For more information about our graduation rates, the median debt of students who completed the program, and other important information, please visit https://www.grantham.edu/disclosures/