The Eliot Rose Blog
Is Your Financial Advisor Working In Your Best Interest?
Added 05/08/2017 by Paul McDermott
In 2016 the Department of Labor (DOL) published a new rule governing the treatment of retirement accounts and the relationship between you and your financial advisor. The rule required your advisor to conduct business in your Best Interest with regard to your retirement accounts. Major Wall Street firms have lobbied against the rule.
The rule was scheduled to go into effect on April 10, 2017, that date has now been pushed back to June 9, 2017 at the direction of the new administration. The rule is now under review and its future is uncertain.
At its core is the nature of the relationship between you and your financial adviser:
A Stockbroker, or Registered Representative, is a fee or commission based salesperson who may sell you a product, regardless of high commissions and other incentives, that is generally suitable for you.
A Registered Investment Advisor (RIA) is a fee based professional required to act in your Best Interest. An RIA is held to a fiduciary standard. The fiduciary standard of care requires that a financial adviser act solely in the client’s best interest when offering personalized financial advice. They are typically paid a fee by clients and avoid products that offer them a sales incentive.
Registered Investment Advisor (RIA) representatives have a legal obligation to put your interests ahead of their own.
How do you know if you are dealing with a fiduciary who is acting in my best interest? Ask some simple direct questions:
Are you compensated by commission or fee?
Do you receive any other compensation or incentives?
Are you paid a higher fee or commission on certain products?
Are you a fiduciary, acting in my best interest in all our dealings?
These are simple questions, and should be answered in simple terms. If you cannot get a straight answer or are uncomfortable with the response, it might be time to review your relationship.
We always recommend you start with a financial plan. A Certified Financial Planner CFP® working at an RIA is a fiduciary that can help get you organized, review your investments, and align them with your goals. You need a plan, and get someone who is working in your best interest.
If you would like to explore the financial planning/investment management process, feel free to email us here or call us at 401-588-5122!