It’s an exciting time, as the Department of Labor just last week announced its long-anticipated fiduciary rule, designed to encourage investment firms to offer superior financial advice to families at lower cost. Personal Capital was at the epicenter of the news, as CEO, Bill Harris, attended the official launch of the fiduciary rule in Washington DC, along with Department of Labor Secretary Tom Perez and Senators Cory Booker and Elizabeth Warren.
With all of this buzz, you’re probably wondering — What does the rule mean for you and your retirement? Read on to learn more:
1. Financial advice around retirement accounts will be in your best interest.
Today, Americans hold $3.1 trillion in traditional pension plans, $5.3 trillion in 401(k)-type plans and $7.2 trillion in IRA accounts. The new rule will legally require any financial adviser who advises clients on retirement accounts — primarily 401(k)’s and IRA’s — to act as a true fiduciary, providing financial advice that is in their clients’ best interest. Prior standards enabled advisers to recommend investments or products that were just considered “suitable” for an investor’s needs (“suitable” meaning advisers can recommend the funds that pay them the biggest kickback, not necessarily the ones that are in the client’s best interest).
2. Technology will be key to understanding best interest.
Brokers and advisors can’t act in someone’s best interest unless they know what those interests are. That entails taking the time to get to know you, learn your financial history as well as your long-term goals. With the new rule demanding transparency between financial advisers and clients, technology is the only way forward. Advisers will be required to provide advice in the best interest of their clients, and the only way to assess their best interests is by having a view of their entire financial advice, which is made possible by the power of technology.
3. More Americans will have access to honest financial advice.
At a time when over half of US adults (51%) feel overwhelmed when they think about the amount of money they need to save for retirement, it’s critical that Americans can count on honest financial advice that will help them prepare for a secure retirement. While we at Personal Capital anticipate minimal, if any, changes to our business model due to the new rule, traditional financial institutions, as well as robo-advisors, will likely have to adapt.
Since inception, Personal Capital has acted as a fiduciary to its clients. As a Registered Investment Advisor, we not only follow the fiduciary standard but embrace it as part of our mission to provide conflict-free financial advice. For more details about the new fiduciary rule:
See Bill Harris’ comments in CNN Money.
Or check out our press release here.
The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.
Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.