U.S. financial advisors will now be required to put their clients best interests before their own profits. This is a new law known as the Department of Labor’s (DOL’s) fiduciary rule or fiduciary standard. FINRA is now holding this standard.
Prior to this rule, financial advisors were not required to put their clients’ financial interests first. They could recommend financial products that were expensive and not in the clients best interest. It is estimated that such conflicts of interest cost Americans $17 billion a year. The DOL estimates that these changes could save affected investors tens of thousands of dollars in retirement savings. According to Harold Evensky, the DOL rule should make the system fairer. However, there is criticism including one U.S. Senator who has referred to this new rule as Obamacare for retirement planning.
Why is the new Fiduciary Rule important?
Under the current suitability standard, if there is a dispute, the responsibility for proving the claim rests on the client. Under the fiduciary standard the responsibility shifts to the financial advisor. This is a distinction that will not be lost on compliance departments according to Mr. Evensky. Keep in mind that while IRAs may be subject to the new fiduciary standard, the old suitability standard (as well as potential conflicts of interest) will still hold for non-IRA accounts.
Have you experienced financial losses?
If you have experienced a loss of $100,000.00 or more in any of your accounts and you are concerned that your financial advisor was not focused on your best interests, or may have been subject to one or more conflicts of interest, please contact the securities arbitration and investment litigation lawyers immediately for a free consultation.