Starting Friday, financial advisers that provide investment advice to individuals for their IRAs, 401ks and other retirement accounts will need to adhere to new rules. These rules are designed to protect investors against adviser conflicts of interest.
Fiduciary Rule is a new regulation by the Department of Labor that requires financial advisers, brokers and other professionals to base their recommendations on actions such as rolling over your 401k to an IRA on financial value for you. This is not just to make more money.
The DOL recognized the need to protect older workers who have large retirement savings and to remove their assets from their plans. All service providers to employer-sponsored retirement plans must now act as fiduciaries.
Financial firms and their advisors who provide investment advice on IRAs or other retirement plans have to comply with fiduciary conduct standards, which include:
It is clear that financial advisors who intend to stay in business for the long-term care about their reputations and always act in the best interest of their clients. While an advisor’s recommendation to transfer your 401(k), to an IRA, may seem better, your adviser should discuss the costs and benefits of your employer’s plan before you take any action.
Large employers plans have a strong bargaining advantage over service providers and investment managers, and they can use their size to negotiate institutional pricing.
It’s not unusual for large plans to offer an S&P 500 Index Fund with annual investment expenses less than 0.5%, as opposed to the average expense of similar retail index mutual funds that can charge fees up to seven to ten times.
Transferring retirement assets to an IRA is a smart move. These include greater investment options, flexible withdrawal features, and ongoing investment management and advice. It is important to evaluate the benefits and costs of an IRA against the costs and benefits of leaving your retirement assets in a 401(k). This will help you make the right decision.
All advisers will be required to comply with the DOLs fiduciary Rule when giving you this advice.
