The DOL Got the Fiduciary Rule Right
The 5th Circuit Court of Appeals ruled on March 15,2018 that the Department of Labor overstepped its bounds in creating the so-called fiduciary rule, parts of which went into effect last year. In general, the rule required that advisors and brokers charge clients the same fee no matter what product they offer them. The so-called conflict of interest provision.
There is talk that the SEC and or FINRA both of whom regulate advisors and brokers will pick up the ball from the DOL and implement their own retirement advice rule. Some think these organizations because they regulate brokers and advisors are better suited than the DOL who governs retirement plans to apply a new standard.
Fixing the Law
By eliminating a 1975 rule, made when pension plans were much different than they are today, the Department of Labor rectifies the contradiction that financial advisors with conflicts of interest are providing financial advice to retirement accounts even though ERISA, the law governing these accounts prohibits this from happening.
What does the new rule mean for consumers? “If you have a 401(k), the advisor fees might come down. If you roll over the 401(k) to an IRA, the fees in the IRA should be the same or lower than what they were in the 401(k). If they are not, then, the financial advisor must pledge to do what is in your best interest.“