Any fiduciaries in the house?
Originally published on: July 1, 2016
Last time, we shared some news about a new rule that will require more of the people who offer investment advice to be fiduciaries. That means they’re legally bound to act in your best interest, without commissions, kickbacks, or any kind of ethical and financial conflict. Which is great, until you ask “wait, you mean they aren’t all required to already?”
No, they’re not. So to help clear up some of the confusion around conflict of interest, here’s a list of those who are definitely fiduciaries:
- Your employer, if you have a 401(k) or similar retirement plan at work.
- All the people and firms who work for your plan or your account, including advice providers like GuidedChoice.
- Registered investment advisors, known as “RIAs.” By definition, they work for a fee (not commissions), and don’t actually hold your money (even if they manage it). Again, we are one – whether your money is in a company plan or one of our own IRAs.
That’s about all for now. As the new rule takes effect over the next year and a half, it will add a couple of categories:
- IRA providers, whether for a brand-new account or a rollover from another plan.
- IRA advisors, including anyone who gives advice about your investment choices, or even recommends a particular provider
That still leaves a lot of others who are NOT fiduciaries, including:
- Large broker dealers known as “wirehouses.” These can be national giants (some of the Big Banks) or more specialized regional companies.
- Independent broker dealers, small local firms that sell a wide range of financial products as well as providing advice.
- Brokers that don’t claim to provide advice at all, or only offer it through a third party.
- Insurance sales people, who generally also provide “advice” about insurance products like annuities.
- Some “Robo-advisors” that deliver investment advice outside tax-advantaged retirement accounts. There’s an ongoing debate about whether an algorithm can be a fiduciary without the kind of oversight we’ve built in to our service.
- The HR department at work, your super-smart aunt Mary, people on Facebook, Jim Cramer…
Keep in mind that some of these non-fiduciary firms may have business units, partnerships, or contractors that actually are fiduciary advisors. It’s complicated, and likely to become even more so once the new rule rolls out. Stay tuned and we’ll keep you informed.
In the meantime, how can you know your interests come above all other considerations? It’s pretty simple: just ask. If you don’t get a clear answer, or don’t like the answer you get, in a $24 trillion industry there are plenty of other professionals standing by to help.
Image courtesy Chris RubberDragon via Flickr Creative Commons