An important change in financial regulations just took place that has a significant effect on what activities our financial institutions (banks, loan operations, retirement plan providers, and investment firms) are allowed to engage in and how protected you are as a consumer. When it comes to banking, retirement, and investing we are all consumers whether we are fully aware of it or not and this matters to all of us. Rules that were once put into effect to help avoid a repeat of the global financial crisis (Dodd-Frank, Volcker Rule) now look like they will be heavily dismantled. New rules requiring Fiduciary Standards (Fiduciary Rule) for advice on your retirement plans and personal retirement accounts that would have begun this April are now paused.
As president of Conscious Capital Management and having performed as a top Financial Adviser for some of the leaders in this industry, I want to share with you a Wall Street secret that relates to how these changes could directly impact you, the advice your given, and your investments. Without the new fiduciary rule, the financial firms that provide services for your 401ks, pensions, or even your personal investment/retirement accounts(IRA’s, brokerage, etc.) are only required to make sure the recommendations given or investments offered are suitable for you. This is the “Suitability Standard” that is required for all financial institutions who provide investments. It means that an investment can be offered to you as long as it meets certain personal financial criteria. It is typically determined by your answers to a series of questions about your financial goals, risk tolerance, time horizon, etc. It can be a relatively loose format, open to interpretation, and is not required to take into account what is in your best financial interests.
That means the basis of this advice does not need to consider additional important factors such as: how much you are getting charged for that investment, if there are any sales incentives behind what is being recommended, or if there are better choices available to you. This is the hole the “Fiduciary Standard” fills since it requires the advisor or retirement plan provider to act in your best financial interests and cover all of these areas. The new law was going to require all financial institutions to follow this standard on retirement accounts. Right now, firms do not have to disclose certain pieces of information that may shed light on why you are receiving certain recommendations and could be prohibiting you from making the best possible decisions. Of course, it matters to you if your best financial interests are being taken into consideration because it can be vital to your retirement.
Although it may be awhile before the laws change again, there is something you can do right now to help protect yourself from things like high fees, poor advice, or just plain bad investments. You can start by asking more questions about your retirement accounts and the recommendations you are given. Ask your advisor or retirement provider things like:
What are the charges or costs to me on these investments?
Does your firm have a Fiduciary Responsibility statement listed somewhere?
Where can I see a list of all the choices available to me?
I would guess more than 80% of the people who first come to see me are holding at least one financial statement where they were unknowingly getting charged high fees for poorly recommended investments. It’s an absolute disgrace to my profession and I am determined to change it. Don’t let ignoring your 401k or being uncomfortable with asking questions be the reason this happens to you. These are fair questions and you can put yourself outside the bigger problem that exists. The current state of our financial system is leading America towards a very dangerous retirement crisis and is the reason why so many are failing to meet their future retirement needs. It’s a problem that while making Wall Street rich, does little for the average hard working American hoping to retire one day. So do yourself a service and look at your accounts, ask questions, or find a fiduciary responsible firm that will provide a free review for you. If you are serious about wanting to retire someday, getting a little more involved can help you keep more of what you have and make that day get here that much sooner.
Conscious Capital Management was born from the idea that there is a better way to serve the average worker, the under-served, and the investor who needs advice they know they can trust. CCM exists as an independent, fiduciary responsible, financial advisory and investment management firm and will always be dedicated to our client’s best financial interests and helping people invest in the right way.
If you have questions, need advice, or want a review of your current investments, you can send an email to firstname.lastname@example.org and I will personally respond with an answer or suggestion, and if needed will provide a free review of your current investments to help you to figure out where your investments stand.