The rule required all financial professionals who offer advice related to retirement savings to provide recommendations that are in a client’s best interest. Currently, financial advisers only have to recommend suitable investments, which means they can push products that may benefit them more than their clients. The rule would require advisers to not accept compensation or payments that would create a conflict unless they have an enforceable contract agreeing to put the client’s interest first. Advisers also would have to disclose any conflicts and charge reasonable compensation.
Americans likely lose about $17 billion from retirement savings every year because of bad financial advice from advisors with conflicts of interest, according to a 2015 report by the White House Council of Economic Advisors.
Even though the implementation of the rule is delayed and possibly scrapped for good, financial companies have already spent money and time to comply with the rule. For example, Merrill Lynch said it was going to stop offering commission-based retirement accounts in order to comply with the new rule. Those companies may not change course even if the rule is rescinded.
Regardless of whether the fiduciary rule lives on or not, consumers should use caution when selecting a financial adviser. Ask your financial adviser if he or she is a fiduciary. If not, then be aware that the adviser is not required to act in your best interest. You should also check your financial adviser’s experience and credentials and beware of phony credentials.