Whats the New Fiduciary Rule?

At long last, the Federal government is rolling out the new financial advisors’ “fiduciary rule.” Here are a few very important things to know about it. The rule is meant to reduce investor abuse at the hands of commission salespeople, estimated by the Feds to cost consumers some $17 billion each year in wealth wasted to bad, self-serving, high-commission advice. The brokerage and insurance industries fought this tooth and nail, but lost a string of lawsuits and must now live with it. The second thing to know – and this is really important – is that the new rule only applies to retirement accounts like IRAs and 401ks. This can lull investors into a false sense of security, where because of the new anti-abuse rule for their IRAs, they believe all their accounts are protected – sadly this is not the case, and abuse may actually increase on other investments, like joint, trust, and other accounts, because clients let their guards down. The third big thing to know is the BICE (rhymes with “lice”) provision. BICE stands for “best interests contract exception,” which is basically a confusing form that allows the advisor to take bigger commissions than might otherwise be allowed if they can convince you to sign the “standard paperwork.” Since most people tend to trust their advisors and sign what is put before them without really reading it, this can be a big danger – being told they are getting fiduciary treatment, but in the end paying big, unseen commissions. The more things change, the more they stay the same – and while the new fiduciary rule for commission advisors is a step in the right direction, it’s a half-measure that will almost surely backfire in many directions. Be careful to not get blasted by it! Camarda continues to believe that “real deal fiduciaries” – registered investment advisors like Camarda who have a legal duty to put clients first in all investment situations, not just IRAs – are the safest path to quality, trustworthy advice.

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