The New Fiduciary Rule and Your Retirement Accounts

You may recall the dustup that happened last February, when President Trump announced by memorandum a delay in the implementation of the fiduciary rule for retirement plans, scheduled to take effect on April 10, 2017. This rule, created during the Obama presidency, required any advisor handling certain types of retirement plans–Roth IRAs, traditional IRAs, and Health Savings Plans (HSAs), etc., for example–to adhere to the standard of fiduciary responsibility. This standard requires advisors to always make recommendations that are impartial and that place the client’s interests first. It also requires them to disclose any fees they are paid for rendering advice or guidance, as well as any conflicts of interest that may exist concerning their recommendations for client accounts. President Trump’s memorandum instructed the Department of Labor (DOL) to delay any implementation of the fiduciary rule until June 9, 2017, in order to permit “further study.”

In a May 23rd Wall Street Journal op-ed column, Secretary of Labor Alexander Acosta stated that while the rule will go into partial effect on June 9th, the DOL will not enforce any of its provisions until January 1, 2018, when the rule is scheduled to take full effect. This of course, may remind you of the question about whether a tree falling in the forest makes any noise if there’s no one there to hear it. Similarly, if the government makes a rule but doesn’t enforce it, is it still a rule?

In any case, according to the guidance provided by the DOL, when the rule does take effect, you may notice some changes in the type of service you receive with regard to your IRA, HSA, and certain other retirement accounts (401(k) plans are not affected by the new rule). For example, if your IRA is being serviced by a major brokerage firm, the person on the other end of your phone call may not be able to give you advice about how to allocate your assets in the account. He or she will still be able to carry out any instructions you give directly, but because most broker-dealers are not fiduciaries, they cannot, under the terms of the rule, advise clients with regard to their retirement accounts. In the same way, if you have been working with your insurance agent or accountant to manage your IRA account, they may no longer be able to give you advice, since many such service providers are not fiduciaries.

However, if you are working with a person who has the Registered Investment Advisor (RIA), you will not notice any changes in the way your IRA or other retirement account is serviced. This is because all RIAs are required to operate according to fiduciary standards. Clients of our firm have the satisfaction and security of knowing that our advisors are required to act in a fiduciary manner, and that all recommendations are made with the client’s interest foremost.

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