How to Invest Now That the Government Won’t Enforce the Fiduciary Rule

A court decision has put the enforcement of an Obama-era rule on hold. Here is how that could impact you -- and what you need to do next.

How to Invest Now That the Government Won’t Enforce the Fiduciary Rule Photo by igorstevanovic / Shutterstock.com

An appeals court decision has prompted the federal government to refrain from enforcing an Obama-era rule designed to protect people who invest for their retirement.

A 5th Circuit Court of Appeals ruling last week found that the Labor Department overstepped the bounds of its authority when it crafted what is known as the “fiduciary rule.”

This rule — established during President Barack Obama’s administration — in general requires financial advisers to put their clients’ interests ahead of their own when offering retirement investment advice.

For now, the Labor Department will back off enforcing the rule, according to a CNBC report:

“Pending further review, the [Labor Department] will not be enforcing the 2016 fiduciary rule,” an agency spokesman said in a statement to CNBC.

How to protect your money

It is important to note that even if the fiduciary rule eventually survives and is enforced, it is not a panacea for investors. For example, the rule’s protections extend only to retirement accounts — an often overlooked fact.

That means advisers will be allowed to ignore the rule when giving advice to clients in the nonretirement portion of a client’s portfolio.

And as Ron Lieber pointed out in the New York Times last year, even if the fiduciary rule were fully enforced, it would be foolish to blindly count on it to comprehensively protect you:

The definitions of “suitability” and “fiduciary” have always been (and will always be) open to much interpretation, no matter who is in the White House or trying to decide what food you’re served on your retirement investments buffet.

So, investors need to stay on their toes regardless of how the debate over the fiduciary rule plays out. What can you do to make sure you’re getting the best impartial advice?

Last summer, we zeroed in on four areas where you should focus when shopping for a financial adviser. They include:

  • Asking a financial adviser what he or she can do for you
  • Inquiring about how the adviser is compensated
  • Learning about the adviser’s credentials
  • Establishing performance benchmarks

For a more in-depth explanation about how to explore each of these areas, check out our story “How to Choose the Perfect Financial Adviser.”

You can also find additional advice in the following Money Talks News stories:

How do you make sure you’re getting the best retirement advice? Let us know by commenting below or on our Facebook page.

Chris Kissell
Chris Kissell
I am the founder of Words At Work, LLC, a writing, editing and consulting company based in Colorado. In the past, I worked as senior editor at Bankrate and senior managing editor ... More

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