If you have an IRA or an Ohio company 401(k), you should be aware of the new U.S. Department of Labor’s (DOL) fiduciary rule that is effective as of Friday, June 9, 2017.
This new rule establishes a higher standard of care for any investment advisor who provides investment advice to IRA or company 401(k) retirement plan account investor.
Most recent polls of individual investors reveal that they don’t understand the concept of a fiduciary level of investment advice. Let me attempt to provide a common-sense definition.
Going forward, all investment advisors who provide investment advice to IRA and company 401(k) retirement plan investors will be legally required to put the best interests of these investors before their own interests. In most cases, the investment advisor’s compensation when making an investment recommendation is the investment advisor’s best interests.
Your IRA and company 401(k) retirement plan account investment advisor can still recommend specific investment products to you. However, the new fiduciary advice rule limits investment advice fees to “reasonable” limits. All fees and expenses of retirement account investment products must be fully disclosed.
The biggest change to your investment management life will be to future company 401(k) retirement plan rollovers to IRA accounts. Every individual investor must deal with one or more company 401(k) retirement plan accounts over their working career. Going forward, when you are able to move your account from your 401(k), your investment advisor is going to have to work harder to disclose the differences between the 4 options available to you (cashing out, remaining in your 401(k), rolling to a new 401(k), or rolling over to an IRA), and which one is in your best interest. Any investment advice company, and their representatives, will be fiduciaries on those retirement accounts. That means all disclosures of conflicts will be required.
Fred Cook, MBA - CAVU Financial, LLC
The opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.