New Retirement Rule: Why You’ll Be Getting Better Advice Next Year
Life + Money

New Retirement Rule: Why You’ll Be Getting Better Advice Next Year


Anyone giving you investment advice on your retirement plans must look out for your financial interests, thanks to a new rule from the Labor Department.

About seven years in the making, the ruling is expected to save investors billions of dollars every year. Currently, many advisers, brokers and agents can recommend retirement investments that are suitable but not necessarily the best option for an investor -- but may be the most profitable option for the adviser.

The department estimates that retirement investments made under conflicted advice will underperform by up to one percentage point a year on average over the next 20 years. That could cost retirement investors between $202 billion and $404 billion during that time, it said.

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The final ruling expands on existing law that protects Americans’ retirement savings by stipulating that those managing pensions and 401(k) funds — usually employers — act as fiduciaries, working in the best interest of plan recipients.

Many Americans now have IRA and Roth IRAs as well and turn to brokers, insurance agents and other investment advisers to help make investment decisions for those accounts. These advisers were not necessarily required to act in the client’s very best interest, as long as their recommendations were generally suitable for the investor’s financial situation.

The Labor Department looked into the conflict of interest issue starting in 2009. It published two separate proposals, one in 2010 and another in 2015, seeking public comment from consumer groups, plan sponsors, financial service firms, academics, government officials and trade and industry associations, among others.

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The new ruling, however, doesn’t go into effect for another year. Certain provisions dealing with disclosure, procedures and contract requirements don’t go into effect until 2018.