Unless you offer financial advice for a living, it is likely you did not notice an announcement from the Labor Department in early April.
But if you pay a professional of any stripe to manage your retirement accounts or advise you on how to manage them, you can be sure your adviser noticed. The long-anticipated new rule will reshape the way the financial industry offers retirement advice, in ways both major and minor.
Here are the basics of the new fiduciary rule that consumers should understand.
Brokers and other financial professionals are sometimes allowed to earn commissions and other forms of compensation that create potential or actual conflicts of interest. Their advice simply has to meet the test of “suitability” – that is, they must suggest investments that are not wildly out of line with a customer’s needs or situation. As long as the suitability requirement is met, brokers operating under these rules can favor products that result in higher commissions or bonuses – and they often do.