1. More advisors will be considered fiduciaries
A fiduciary is a person who is legally obligated to act in the best interest of the person whose money or property they are managing. You might assume anyone providing financial advice in a professional capacity is a fiduciary. That's not the case under the current rule.
Right now, those offering one-time financial advice aren't considered fiduciaries, nor does the law require a fiduciary standard for those providing advice to workplace plan sponsors about 401(k) lineups or to anyone providing recommendations to purchase non-securities, such as real estate or fixed-income annuities.
"The regulation closes the loophole for one-time advice," said the U.S. Department of Labor Fact Sheet. The Retirement Security Rule broadens the definition of a fiduciary to include any financial service provider who is compensated to provide advice to individual retirement account owners, employers and plan fiduciaries.
For example, Advisor.com is a financial advisory firm that helps connect consumers with a network that includes accredited fiduciary advisors, who are vetted based on their credentials, education, experience and pricing.
2. It requires investment advisors to work for you
When investment advisors act in the interest of consumers — rather than recommending investment products to earn a big commission — consumers can save money and better benefit from the service. The new rule also clarifies the exact duties advisors owe to you when acting in their fiduciary roles.
Their obligations include providing advice that is:
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Prudent: It meets the professional standard of care.
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Loyal: Your interests are put first and advisors clearly disclose any potential conflicts of interest.
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Honest: The advisor isn't misrepresenting any information
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Fairly priced: advisors cannot overcharge you or receive unreasonable or excessive compensation.
A good financial advisor will assist you in identifying investment opportunities with fair costs and transparent fee structures.
For example, Advisor.com offers an annual flat fee, so there are no surprises down the line when it comes to how much you pay for their services.
3. New rule could make accessing advice harder
The rule sounds pretty great so far, so why is it controversial?
Many lawmakers and industry groups argue it could make accessing retirement advice more difficult for the average American.
"It leaves retirement savers with fiduciary advisors as their only option for professional financial guidance," according to the American Council Of Life Insurers. "Fiduciaries typically work with clients with a minimum of $100,000 to invest, far more than most working-class Americans have in savings."
However, Many Americans don’t have a minimum of $100,000 to invest. This is especially true for American families with members under age 35 — data from the 2023 Federal Reserve Survey of Consumer Finances shows they have a median net worth of $39,000.
However, the median net worth of families with members who are 35-44 years old jumps up to $135,000.
With no minimum-asset requirement or sales commissions, Advisor.com can help you create a plan to make your financial goals a reality no matter what your current net worth is.
When you get matched with a financial advisor, you can book a free no obligation consultation to ensure their team is the right match for you.
