The political wrangling over the new rule governing retirement advice from the Department of Labor (DOL) will grind on until July 1, 2019. That’s the new deadline for the rule on how advisors must act with clients takes full effect. But the rule has already changed “business as usual.” Business reporters can give their readers a head’s up on how the new rule is changing financial advice by looking at one or more of these stories:
How does the DOL rule change financial advice?
Effective immediately, all financial advisors, also known as investment advisors, must give advice that meets a fiduciary standard of care. That means the advice is in the client’s best interest—not the advisor’s. Interview several types of advisors, including a Registered Investment Advisor, a broker and an insurance agent, as well as those working independently and at large financial services firms, about changes to their business. Read the DOL rule to come up to speed.
Previously, an advisor such as a broker or insurance agent could give advice that only had to be “suitable” (not “best,”) meaning that it met the client’s need and objective. In 2015, advisers in the Obama administration who promoted the rule said that working and middle-class families shell out $17 billion every year for biased advice, and that retirees receiving conflicted advice lost 12 percent of their assets.
What changes do investors need to know about?
There are several. Many of your readers will be surprised to learn the rule affects largely new advice and investment recommendations. The new rule may also cost some investors more money, as advisors face increased compliance costs to do business. But others may discover new, lower-cost financial products such as “clean shares”: mutual funds that eliminate some of the fees, in order to keep their business.
How do investors find a new advisor?
There are different types of advisors for different types of financial needs, as explained in these articles from the personal finance site The Motley Fool and the Consumer Protection Bureau. If a consumer is seeking help with long-term financial objectives, they will want to find an advisor who is also a Certified Financial Planner. CFPs must be licensed and regulated and take mandatory classes on different aspects of financial planning every year.
On cost, financial advocates recommend planners who charge fees only for their services, but their fees are out of reach for working and middle-class families. The National Association of Fee-Only Planners and the Financial Planning Association offer searchable databases. For fee-only planners who charge a more affordable hourly rate, there’s the Garrett Planning Network. A new fee-only service targeted to Gem and Genie investors, XY Planning Network, also charges hourly. Spelling out all the options for your readers will make for a helpful personal finance story.
• Barbara Roper, head of investor education at the Consumer Federation of America, is a good source of information on the rule.
• Sheryl Garrett, the founder of the Garrett Planning Network, is a respected source on financial planning.
• At NAPFA, press contact Jackie O’Reilly can connect reporters with a fee-only planner to interview.