When you discuss your retirement funds with your financial adviser, you expect they make recommendations that will earn you the most money, right?
This is not always the case.Â Financial companies frequently pay advisers to recommend specific products. If the product will result in less money for you, but more for them, they are not legally required to recommend the product that would benefit you.
Americans lost an estimated $17 billion in 2015 because financial advisers made recommendations that served their own interests before their clientsâ€™. (From theÂ THE EFFECTS OF CONFLICTED INVESTMENT ADVICE ON RETIREMENT SAVINGSÂ Report by theÂ Presidentâ€™s Council of Economic Advisers)
On April 10th, a new law will go into effect that requires anyone who provides retirement advice to become a â€œFiduciary.â€ Being a Fiduciary means they must put your interests above their own. If they donâ€™t, you will have legal recourse.
Investment firms are scrambling to make massive changes to their fee structures to prepare to become fiduciaries. Many in the financial world are spreading fear about the new law, saying that individuals who earn less will no longer be able to afford investment advice. Advisers are claiming the only way they can continue to provide advice is if they can take these offers from financial companies and accept higher commissions even if it hurts you.
If this seems absurd to you, itâ€™s because it is. If Americans cannot afford financial advice that is in their best interest, they certainly canâ€™t afford advice that would cost them tens of thousands of dollars in the long run!
Unfortunately, some of the larger banking companies are predicting that President Trump is going to postpone this rule in order to please large companies on Wall Street. Advisers will be able to continue to make retirement investment recommendations that arenâ€™t best for you.
Even if the rule does go into effect, it only applies to retirement account investments. Any other investment advice is not protected.
The only way to ensure your adviser is putting your best interests before their own is to ask them a simple question: â€œAre you a fiduciary?â€ If they hem and haw and explain why itâ€™s better for you that they are not, itâ€™s time to find a new adviser. If they say yes, you can move forward with confidence that your financial interests are their priority, rather than their own.
Due to all the misconceptions around the fiduciary rule, formally called the â€œConflict of Interest Rule,â€ we are providing a FAQ series on our Facebook page. Please join us here to understand some of the major myths surrounding the rule.
AtÂ Castle Rock Investment Company, weâ€™ve committed to being a fiduciary since we opened 10 years ago. Whether or not the rule is postponed, we will continue to be a fiduciary. We put our clientsâ€™ interests before our own whenever providing recommendations, not just retirement accounts. We chargeÂ flat feesÂ (and weâ€™re now introducing a less expensiveÂ subscription modelÂ for individuals just starting out investing that is 50% less than our project based fees!). We value transparency; you will always know how much youâ€™re paying.
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