2017 is seeing changes to the Department of Labor (DOL)’s rules and standards for financial and investment professionals who work with retirement accounts. If you have a retirement account, this rule may have some impact on your account – but it will have sweeping consequences for the processionals who manage these accounts and advise investors.
Under the new rules, many financial advisors are now held to higher standards when advising clients on retirement investments. If have a 401k or other retirement or investment plans, this means your advisor must put your best interests first and help protect your investments. If you are a financial advisor, it means stricter rules for advising on retirement. If you have questions about your fiduciary duties as a financial advisor, or you think your financial advisor mishandled funds, Baltimore civil litigation attorney Ken Gauvey may be able to help. Contact the Law Practice of Ken C. Gauvey today for a free consultation on your case.
New Retirement Account Fiduciary Rules for Financial Advisors
If you have been working as a financial advisor or have managed 401k and other retirement plans, you are likely familiar with the professional standards that have governed this industry for years. Under the old scheme, financial advisors were held to a “suitability” standard, where the ultimate goal was to meet a client’s needs and goals with your advice. There may be multiple ways to achieve that goal, and advising a client on different options to achieve the same goal allows the client to decide their level of risk.
Under the new scheme, financial advisors will be held to the incredibly high standards of “fiduciary duty.” These standards apply to people like CEOs and board members of corporations, banks, and charities. Holding financial advisors to these high standards puts many financial workers in the crosshairs of potential lawsuits by dissatisfied clients. While some of the most successful financial advisors may already put their clients’ best interests first, all financial advisors for retirement accounts are now legally required to do so, as long as this fiduciary rule stands.
What this means, in a practical sense, is that you must now:
- Charge reasonable rates for service;
- Avoid conflicts of interest regarding payments from commission;
- Know in what specific situations the fiduciary rule applies;
- Reconsider how investments protect the client’s best interests.
As the rule stands, it only applies to certain retirement accounts – not to all financial investments you may manage. What this means is that you only act as a fiduciary when discussing retirement funds, such as 401ks, 403bs, IRAs, defined-benefit plans, stock ownership plans, and other accounts and investments.
If you are concerned about where to draw the line on when you act as a fiduciary, and what changes that means you need to make in your practice, talk to an attorney. Ken Gauvey is available not only for defending you if you have been accused of breaching this new fiduciary duty, but also for advising on fiduciary duty requirements for you and your financial practice.
Changes to 401k Plans with New Department of Labor Rules
If you have a 401k, an IRA, or another retirement plan, you may be in store for some improvements to transparency and the quality of financial services. The Department of Labor’s new standards put a higher burden on financial advisors who work with retirement accounts, and forces them to put your interests first. This means there are now stronger regulations regarding areas like:
- Hidden or changing fees,
- Commission-based fees,
- Required disclosures to clients, and
- The care used in managing your funds and accounts.
Overall, this is a good change for consumers. While it may be a rough road for financial advisors to adapt to the changes, it can ultimately help you have a better idea of what you’re investing in, and what stake your advisor has in the investment.
Because of the new fiduciary requirements, financial advisors who work on your retirement account may start moving away from commission-based payments. While this may mean you are forced to switch to a fee-based account, with annual or quarterly payments, it may ultimately save you money on your account fees. This may also open the doors to new investment strategies, with your best interests as the primary goal.
Lastly, you should be on alert when signing new documents or agreements. Because advisors are now required to disclose their conflicts of interest, commission-based pay, and other things, you may be given documents to sign that include these disclosures. Read them over, because signing the agreement may put you on legal “notice” of the conflict of interest, and remove your right to complain about it later. Additionally, these rules only apply to retirement investing, so your advisor may not have these same, strict duties with your other accounts or investments. Be sure to ask questions to understand the financial advisor’s duties. And, if the advisor does something that betrays these new high standards, be sure to speak to an attorney about it.
Baltimore Breach of Fiduciary Duty Attorney
If you work in the financial industry and are accused of breaching the new fiduciary standards, talk to an attorney right away. Additionally, if your retirement account was mishandled by a financial advisor, you were given misleading financial advice, or you discovered a conflict of interest in your retirement account management, talk to an attorney today. For help on your case, consider talking to Baltimore corporate and financial lawyer Ken Gauvey. For a free consultation, call 443-692-7685 today.