Regulation Requires Financial Advisors To Give Good Advice

Finally, financial advisors really DO have to work for you.

That wasn’t always the case, but a U.S. Department of Labor rule that went into effect in April requires financial advisors to do what they always should have been doing, namely putting the interests of clients head of their own.

“Since 1974, the Employee Retirement Income Security Act has provided the Department of Labor with authority to protect America’s tax-preferred retirement savings, recognizing the importance of consumer protections for a basic retirement nest egg and the significant tax incentives provided to encourage Americans to save for retirement,” according to the announcement of the regulation on the government’s website “But the basic rules governing retirement investment advice have not been meaningfully changed since 1975, despite the dramatic shift in our private retirement system away from defined benefit plans and into self-directed IRAs and 401(k)s. That shift means good investment advice is more important than ever.”

The new rule will “require more retirement investment advisers to put their client’s best interest first, by expanding the types of retirement investment advice covered by fiduciary protections.” This, the site states, closes loopholes in the definition of retirement investment advice under outdated Department of Labor rules that exposed many middle-class families, and especially IRA owners, to advice that may not be in their best interest.

The new regulation was soundly praised AARP Executive Vice President Nancy LeaMond.

“A little over a year ago, President Obama visited AARP to announce this proposed rule and we told him that we know the people we represent have worked hard to save for retirement and they deserve to have financial advisers who work just as hard to protect what they’ve earned,” she said in a statement. “In today’s world, it’s hard enough to save for retirement and achieve your financial goals. The new rules will help make sure that we don’t make it more difficult to save and invest by allowing some advisers to take advantage of hard-working Americans. Bad financial advice is just wrong, and this rule will no longer permit advisers to put their own interests ahead of their clients.”