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What You Should Know About New Fiduciary Rules

April 17, 2016

Filed under: Estate Planning — Neel Shah @ 9:15 am

In terms of your retirement accounts, a new possible change coming down the pike could mean that your broker can be classified as a fiduciary.  In the next few months, the Department of Labor will be putting together the final version of a new standard for fiduciaries. This represents what many consider to be the biggest changes to ERISA in the past four decades. shutterstock_125871293

 

Since the initial definition of fiduciary outlined in ERISA in 1974, the world of 401(k)s has evolved a great deal. Investment advisors currently connected to the SEC have to be held to general fiduciary standards of conduct, putting the client’s needs in front of their own. The standards for securities brokers, however, are somewhat different. Securities brokers are regulated by FINRA and the framework is one of suitability, meaning that a broker does not have to put the client’s needs first. If a dispute happens between a client and broker, the situation is handled with arbitration.
Opponents of the change argue that it will hurt investors. There’s no doubt that with the increased monitoring costs associated with this kind of exposure that clients may be the ones absorbing the higher cost. Some firms may also decide that the costs of compliance are simply too high and exit this altogether.

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