After years of debate, the Department of Labor (DOL) “Conflict of Interest Rule” is finally scheduled to take effect in April. In a nutshell, the new rule requires retirement advisers to meet a fiduciary standard. A fiduciary standard legally obligates the adviser to place the interests of the client first, whether offering advice or recommending products.
While most people assume that every financial adviser is required to provide advice according to their best interests. It’s just not so. In fact, most financial advisers DO NOT have an obligation to act in your best interest.
Why does it matter, you ask? Well, the White House Council of Economic Advisers found that conflicts of interest lead, on average, to $17 billion of losses every year for America’s families — this represents tens of thousands of dollars for many families over the course of a lifetime. The DOL established the new rules in an effort to crack down on conflicts of interest and level the playing field for the financial advisers who are already doing right by their clients.
As one might imagine, Wall Street brokerage and insurance firms have vehemently opposed the implementation of this rule as they stand to lose billions and billions of dollars. With the election of President Trump, the fate of the DOL’s fiduciary rule is in question and financial firms that oppose the rule have renewed hope that things will return to business as usual -- truly, a blow to American families.