Watch William Brangham’s debrief with Gwen Ifill on the details of these changes. The discussion, which aired in December, covers the debate among financial advisers, who say the cost of compliance is burdensome, and those trying to offer greater protections to consumers, who say the fiduciary standard is a no-brainer.
If you assume that your financial adviser has your best interest at heart, here’s some news: that’s not necessarily the case.
But the Department of Labor is trying to change that. This morning, the Department of Labor announced a new rule meant to legally hold financial advisers to your best interest.
Some advisers already follow guidelines required to serve the customer’s best interest — called the fiduciary standard — but many advisers follow the so-called suitability standard. The suitability standard allows advisers to choose from multiple “suitable” options — each that come with different commissions for the adviser.
But when interests are misaligned, the Department of Labor and consumer protection advocates worry that the product often sold is the one that gives the biggest payout to the adviser, not the customer.
Even if advisers are trying to act in their customers’ best interest, “they are operating in a structurally flawed system,” said Secretary of Labor Tom Perez, speaking at a press conference at the Center for American Progress today.
The White House estimates that working- and middle-class families lose $17 billion every year as a result of “conflicted advice.”
The new rule will apply to all financial advisers offering investment advice for retirement accounts and will take effect in April 2017. Full compliance will be required by January 2018.