“Thought for the Day” #917 – by Stephen R. Elville, J.D., LL.M.

March 2, 2017

President Trump signed an executive order calling for a review of the so-called fiduciary rule, which was intended to prevent financial advisers from steering their clients to bad retirement investments by requiring advisers to act in the best interests of their clients.  The order delays the rule, which was scheduled to go into effect in April 2017, and the rule may ultimately be repealed. Prompted by concern that many financial advisers have a sales incentive to recommend to their clients bad retirement investments with high fees and low returns because they get higher commissions or other incentives, the Department of Labor drew up rules in April 2016 that would require financial advisers to act like fiduciaries.  The rule required all financial professionals who offer advice related to retirement savings to provide recommendations that are in a client’s best interest.  Currently, financial advisers only have to recommend suitable investments, which means they can sell products that may benefit them more than their clients. The rule would require advisers to not accept compensation or payments that would create a conflict unless they have an enforceable contract agreeing to put the client’s interest first.  Advisers also would have to disclose any conflicts and charge reasonable compensation.