Wait a minute… the new “Fiduciary Rule” is supposed to make all financial advisors put their clients’ best interests first, but has exceptions?

A few weeks ago, the Department of Labor finalized the new “Fiduciary Rule.” In concept it helps protect investors from abuse, but it has big gaps, through exceptions. Unfortunately the gaps are not easy to find, but could negate much of the intent of the new rule.

As context, most people aren’t aware that investment advice companies fall into two groups: 1) A big group of companies, enormous and tiny, that do not or cannot promise in writing to act only in your best interests, despite what their advertisements might imply, and; 2) A relatively small but growing group of organizations that accept fiduciary status in writing, legally binding them to act only in your best interests. WealthStep is in the second set, in case you were wondering.

The new law will certainly help some investors. There’s a chance, however that it could make things worse for many… since firms with conflicts of interest can advertise themselves as conflict-free, but then have legal loopholes that allow the conflicts to continue. The conflicts may be disclosed, but the fine print may be buried and difficult to interpret.

Also, the new rule only applies to retirement plans and Individual Retirement Accounts (IRAs), while trillions of dollars in regular/taxable investment accounts receive no additional protections from the law.

If your friends aren’t aware of all this, they might thank you for cluing them in.

Clients of WealthStep can rest easy, because WealthStep accepts fiduciary status in writing, agreeing legally to act only in your best interest. But, the best part is that WealthStep does that because it is the right thing to do, to be consistent with a philosophy of placing clients first.