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Financial Alternatives

Financial Alternatives News and Insights

Integrated Wealth Management

New Department of Labor Rules Coming Soon

The Department of Labor is coming out with new rules in the next couple of weeks that some in the financial services industry have said is the most disruptive piece of regulation to come down since 1974.  What will it say? It will basically require that financial advisors act in their clients’ best interests - as a “fiduciary” - when advising on company retirement plans such as 401(k) plans.  Currently, advice on these plans only has to be “suitable”, which can lead to the sale of expensive or inferior investment products.

Our Thoughts

We welcome the spirit of this rule and the additional transparency it should bring - and since we already recognize a fiduciary duty to our clients, it should pretty much be business as usual here at Financial Alternatives.

Like any regulation though, the devil will be in the details.  Hopefully the change will eliminate the abusive practices we frequently read about - such as this comment from a recent WSJ article.

We have various record keepers and advisers aggressively calling our retirees and trying to persuade them to roll over to their platforms, in many cases with conflicted and misleading marketing material.

However, there will no doubt be unintended consequences and creative responses (particularly from large retail brokers) that are yet to be seen.  We could end up with a quagmire of forms, disclosures and other knock-on effects that do little to help investors.

Questions to Ask Your Advisor

Ultimately, we believe advisors who recognize an ongoing fiduciary duty are best positioned to help clients navigate the financial markets and the myriad financial products and services available to them.  If you’re looking for an advisor with this issue in mind, here is a list of questions to ask them first.