New retirement rule may not prevent bad advice

You don’t have to take the advice of your financial adviser.

I need to say this because, already, some investment professionals are scaring clients into thinking that the federal government is forcing them to invest a certain kind of way — all to comply with the Labor Department’s new fiduciary rule.

Under guidelines that went into effect Friday, investment professionals, when giving advice about retirement plans such as a 401(k), are required to put their clients’ interests first.

An investment adviser has a “fiduciary duty” to act in the best interests of his or her clients. Financial-planning professionals who are not “fiduciaries” — say, certain brokers or insurance agents — aren’t held to that same standard. They just need to make sure that their advice is “suitable” for their clients. What this means, in practice, is that they can have all kinds of conflicts of interest. For example, the person advising you to buy a certain mutual fund might not reveal that he is getting a huge commission to sell you the fund or that there is a similar lower-priced product available.

ADVERTISEMENT
0 seconds of 0 secondsVolume 0%
Press shift question mark to access a list of keyboard shortcuts
00:00
00:00
00:00
 

The law of the land now is: If you give retirement investment advice, you are a fiduciary and, as such, you have an obligation to give advice that is in the best interest of your client. This includes considering a client’s investment goals and risk tolerance.

Consumer advocates championed the rule’s implementation. For obvious reasons, many investment companies and professionals did not.

As the fiduciary rule is phased in, be cautious about the advice you’ll receive. Some confused or unscrupulous advisers may still try to steer you wrong.

I spoke with Barbara Roper, director of investor protection for the Consumer Federation of America. “The rule does not in any way limit what people can choose to do with their own money,” Roper said.

Firms not sure of what they should do need to check with the Labor Department before making these sorts of recommendations, she said. And, as long as advisers are documenting their recommendations and a client’s desire to do something contrary to their advice, they should easily withstand the “best interest” test.

© 2017, Washington Post Writers Group

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

A standard jet fuel, left, burns with extensive smoke output while a 50 percent SAF drop-in jet fuel, right, puts off less smoke during a demonstration of the difference in fuel emissions on Tuesday, March 28, 2023 in Everett, Washington. (Olivia Vanni / The Herald)
Sustainable aviation fuel center gets funding boost

A planned research and development center focused on sustainable aviation… Continue reading

FILE — Jet fuselages at Boeing’s fabrication site in Everett, Wash., Sept. 28, 2022. Some recently manufactured Boeing and Airbus jets have components made from titanium that was sold using fake documentation verifying the material’s authenticity, according to a supplier for the plane makers. (Jovelle Tamayo/The New York Times)
Boeing adding new space in Everett despite worker reduction

Boeing is expanding the amount of space it occupies in… Continue reading

Paul Roberts makes a speech after winning the Chair’s Legacy Award on Tuesday, April 22, 2025 in Tulalip, Washington. (Olivia Vanni / The Herald)
Paul Roberts: An advocate for environmental causes

Roberts is the winner of the newly established Chair’s Legacy Award from Economic Alliance Snohomish County.

Laaysa Chintamani speaks after winning on Tuesday, April 22, 2025 in Tulalip, Washington. (Olivia Vanni / The Herald)
Laasya Chintamani: ‘I always loved science and wanted to help people’

Chintamani is the recipient of the Washington STEM Rising Star Award.

Dave Somers makes a speech after winning the Henry M. Jackson Award on Tuesday, April 22, 2025 in Tulalip, Washington. (Olivia Vanni / The Herald)
County Executive Dave Somers: ‘It’s working together’

Somers is the recipient of the Henry M. Jackson Award from Economic Alliance Snohomish County.

Mel Sheldon makes a speech after winning the Elson S. Floyd Award on Tuesday, April 22, 2025 in Tulalip, Washington. (Olivia Vanni / The Herald)
Mel Sheldon: Coming up big for the Tulalip Tribes

Mel Sheldon is the winner of the Elson S. Floyd Award from Economic Alliance Snohomish County

Craig Skotdal makes a speech after winning on Tuesday, April 22, 2025 in Tulalip, Washington. (Olivia Vanni / The Herald)
Craig Skotdal: Helping to breathe life into downtown Everett

Skotdal is the recipient of the John M. Fluke Sr. award from Economic Alliance Snohomish County

Katie Wallace, left, checks people into the first flight from Paine Field to Honolulu on Friday, Nov. 17, 2023 in Everett, Washington. (Olivia Vanni / The Herald)
Executive order makes way for Paine Field expansion planning

Expansion would be a long-range project estimated to cost around $300 million.

Dick’s Drive-In announces opening date for new Everett location

The new drive-in will be the first-ever for Everett and the second in Snohomish County.

Helion's 6th fusion prototype, Trenta, on display on Tuesday, July 9, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
Helion celebrates smoother path to fusion energy site approval

Helion CEO applauds legislation signed by Gov. Bob Ferguson expected to streamline site selection process.

The Coastal Community Bank branch in Woodinville. (Contributed photo)
Top banks serving Snohomish County with excellence

A closer look at three financial institutions known for trust, service, and stability.

Image from Erickson Furniture website
From couch to coffee table — Local favorites await

Style your space with the county’s top picks for furniture and flair.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.