After four years of planning, federal regulators of the U.S. Labor Department proposed rules that would strengthen the protection of those investing their retirement money. The new rules would require that brokers owe a stronger fiduciary duty to their clients. Currently, the rules are vague and use ambiguous language, allowing brokers to skirt around the guidelines and in many instances, put their own investment interests first.
Brokers have to recommend investments that are “suitable” for their clients. While they need to take into account the client’s age, and both the risk factors and the financial goals of the investment, many times their recommendations are persuaded by their own potential to gain a profit at the client’s expense. Under the new regulations, a broker would have to inform their client whether they had a conflict of interest and received a fee as a result of the investment. The transparency required under the new rules would enhance the quality of the advice brokers give to the investors.
Although the financial industry claims that stricter rules will raise costs and limit advice, retirees will be offered greater latitude in making the determination with whom they should be investing their money, and deterring bad advice. Additionally, there are exemptions to the proposed rules that would allow brokers to receive payments otherwise prohibited, provided that they offer their client the least expensive option.
The proposed rules are open for commentary for 75 days beginning on April 13.
Many people use their retirement funds investments as part of their estate planning. For more information about estate planning, contact an experienced elder law attorney. Call the Law Office of Tanya Hobson-Williams at 1 (866) 825-1529 or visit http://www.thobsonwilliamslaw.com.