It may be surprising to learn that although the landscape has changed drastically over the past 40 years, regulations pertaining to retirement plans have not. Since 2010, the Department of Labor (DOL) has been working to redefine and clarify what the term ‘fiduciary’ means under the Employee Retirement Income Security Act (ERISA), in April, the final rule was released. The new definition specifically looks at the distinction between providing investors ‘education’ and ‘advice’. The new rules set forth by the DOL redefines who is classified as a fiduciary and what responsibilities accompany that title.
So, what does this mean for American investors, like yourself? Our post today dives into the specifics of the new fiduciary rule, what it means, recent developments, and how it relates to our firm specifically. Read on to find out more on The Fiduciary Rule: How the House Voted.
Understanding the DOL’s New Fiduciary Rule
Essentially, the Fiduciary Rule proposes to regulate financial firms and advisors in a way that would require them to put client’s best interests before their own profit making. The rule will require those providing investment advice (ex. your financial advisor) to retirement plan sponsors and participants to follow the fiduciary standard of conduct. Under the new rule, all advisors will be required to act in the best interests of their clients. Some may choose to file an exemption known as the Best Interest Contract Exception (BICE or BIC), which allows advisors to receive variable compensation.
While most financial advisors already assume fiduciary standards, it’s now a mandate that all advisors must adhere to. Previously, only Registered Investment Advisors (RIA) were required to act as fiduciaries. The new rule is designed to protect average American investors from hidden fee structures or conflicted investment advice due to incentives and sales goals set forth by some investment firms.
How the House and Senate Voted
As the retirement plan industry works to comply with the new rule, you will see many news articles and information about the good and bad fallouts from the changes. Many people in the Brokerage Industry are upset with the new Fiduciary Rules because compliance could cost upwards of hundreds of millions of dollars and force smaller to mid-level firms to either fold or merge with larger corporations. People of this opinion fear brokerage jobs will be lost and that the new rule could result in clients with lower performing portfolios to be turned away from financial advice. Both the Senate and House voted in April to overturn the regulation under the Congressional Review Act, but President Obama vetoed the measure in June. Obama’s statement to Congress about the veto was, “Because this resolution seeks to block the progress represented by this rule and deny retirement savers investment advice in their best interest, I cannot support it.”
TrueNorth Retirement Services Stance
At TrueNorth, we have been fiduciary advisors for over 20 years and have always had our client’s best interest in mind. Our investors can rest assured that we take steps to go above and beyond standard protocols and industry regulations to require all our advisors to act as fiduciaries for our clients. We operate with transparency; our investment advice is not based on sales incentives. Our fees are based on account values and our prime incentive is to help build your assets in a way that aims to provide strength against volatility in the markets and to assist you in reaching a comfortable retirement. At TrueNorth Retirement Services, we pride ourselves on integrity and honesty with our clients.
The new rule goes into effect soon, if you have questions about how the new regulation may affect your existing advisor relationship, now is a great time to ask! Our DOL Questionnaire [link PDF] provides simple questions that can help you discover if your advisor is acting solely in your best interest.
For more specific questions on your individual financial needs, please contact your financial advisor to set up a portfolio review. For more financial information and advice, call: (801) 274-1768 or email info@truenorthwealth.com. We look forward to continuing to assist you on your financial journey.
At TrueNorth Retirement Services, we can help make your journey easier. We believe in honesty, reliability, and hard-work. As fee-only fiduciary advisors, we sit on the same side of the legal table as plan sponsors providing sound investment advice. We listen to plan sponsors and understand your challenges. Our goal is to understand your needs and then try to create a plan to address those needs. We appreciate the opportunity to assist you, your company’s retirement plan, and your participants. For a free financial consultation, please call: (801) 274-1768 or email info@truenorthwealth.com.
