Buyer beware – Proposed investor protections don’t actually protect much

True or false?: All financial firms and professionals are required to act in your best interest, right? Answer: FALSE. Many have conflicts of interest, and biased “advice” damages results… A recent White House Council of Economic Advisers analysis estimate showed that conflicts of interest hurt affected investor accounts by ~1% each year. This amounts to around $17 billion annually. And since it is mostly related to fees and costs, it is the conflicted companies that keep the difference.

In April, 2015, the US Department of Labor (DoL) moved, or at least leaned, to address this problem through a proposed “Fiduciary Rule” that would increase protection for retirement plan and IRA account investors. All financial advisors (including brokers and insurance agents) would have to provide advice that is in the best interest of clients. The acceptance of payments that create conflicts of interest would not be allowed.

But it is never that easy or clear. Due to heavy financial industry lobbying, the proposed rule allows conflicted investment professionals to opt-out of the rule! With some hard-to-find and hard-to-read disclosures required for an opt-out, the average investor is back to square one.

And, remember that there are also trillions of dollars outside of the purview of the DoL that don’t have a “Fiduciary Rule” at all.

The good news is that WealthStep has always agreed in writing to act only in the best interests of clients… always has been and always will be our “fiduciary rule.”

So, if you have assets elsewhere… buyer beware!