Executive Order: Halt & Review of Consumer Protection Rule For Retirement
By Kristina Mancino
In April of 2017, The Department of Labor’s fiduciary rule, better known as the “conflict-of interest rule,” was set to be complied by financial professionals. The federal rule would make financial professionals to act in the best interest of their clients regarding any investment advice on retirement accounts.
“The Labor Department regulation covers financial professionals who are compensated for investment advice on 401(k)s, IRAs and other retirement accounts, whether through a flat fee or commission or other means. These professionals would have to adhere to a “fiduciary standard” that requires them to act in a client’s best interest — not their own.”
As the new President of the United States, Donald Trump, begins his first 100 days in office, he has sign a lot of executive orders. Some have been newsworthy while others slide by without anyone noticing. In the beginning of February, Donald Trump signed an executive order to further review, revise, or even get rid of the conflict-of-interest rule.
So what does this mean for your retirement planning? Workers and other investors in IRAs, 401(k)s and similar account can continue to incur hidden fees that could chip away a person’s retirement security. It’s estimated, by proponents of the rule, that these fees cost Americans $17 billion a year on IRAs. The four-decades-old regulations on investment advice has been a hot topic with consumer advocated arguing that it’s outdated and lacks in protecting millions of Americans who are responsible for their own retirement plans through IRAs and 401(k)s.
To comply with the April 2017 deadline of implementing the new fiduciary standard, time and money have been spent by firms, brokers, and agents. Opponents of the conflict-of-interest rule argue that the new regulations would reduce advisers’ compensations from commissions and fees. This could result in higher services charges and could because unaffordable to small investors. Time will tell what happens with this new possible regulations. Either people will protected against hidden fees or they will continue to have to pay.