Under new Labor Department rules set to take effect Sept. 23, financial professionals would be required to have “policies and procedures in place to manage conflicts of interest and ensure providers follow these guidelines.”
Starting Sept. 23, there is good news for savers who want a fair shake when looking for investment advice. Let’s hope that the new Department of Labor rules are here to stay.
If the rules are enacted, more professionals than ever before will be required to act as fiduciaries when clients pay them for investment advice on Individual Retirement Accounts. This will add another level of protection to an instrument that for many represents a lifetime of retirement savings.
What, you might ask, is a fiduciary? It is someone responsible for managing money or property for someone, who must put that client’s interests ahead of their own. Such a person (or organization) is legally and ethically obligated to act in the best interests of another person or entity.
Many people fail to understand that the rules governing financial professionals vary, depending on where they work and what products they sell. They just assume that a “trusted adviser” is just that.
The goal of the legislation is to minimize conflicts of interest and to end the practice of selling goods and services that simply line the pockets of the seller at the expense of the buyer. Through the years, I have seen this done more times than I care to count, with upper management in many Wall Street firms encouraging the practice and rewarding the perpetrators with fat bonuses.
In my own career, there were times that I was not required to act as a fiduciary, but I adhered to the letter of the law anyway. As a registered investment adviser at my former firm, Berkshire Money Management, it was a requirement. In my opinion, the financial services business is built on…
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