The New Rule Will Require Financial Advisors to Act in Your Best Interest
Certified Financial Planners (CFPs) have a fiduciary duty: a legal obligation to offer financial advice that suits your interests. This is why we suggested finding a real CFP if you are looking to hire someone to manage your money . However, the new rule will require a fiduciary duty for all financial advisors.
“Financial advisor” is a general term used to describe any professional who gives financial advice, even if he is actually just selling you something. As the Spotted Fool explains :
So these people can be called financial advisors, asset managers, investment managers, financial planners, financial life coaches and the like. And almost anyone can say they are. There is no common terminology for many of these things. There are no laws around this. Just because someone says they are giving financial advice, they cannot really give financial advice. They might just sell you something. They may be what is traditionally considered a broker or agent.
On the other hand, the Certified Financial Planner® is certified by the Certified Financial Planner Board of Standards, Inc , so not everyone can call themselves a CFP.
After more than a year of researching the financial services and retirement planning industry, the White House Council of Economic Advisers found that consumers lost an estimated $ 17 billion annually following advice from advisers with conflicts of interest. The Labor Department finalized new rules this week. NPR reports:
Under current regulations, consultants “say something like, ‘We put our clients first,’” he said. Looking ahead, “This is no longer a slogan. This is the law. “
[Labor Secretary Tom Perez] says the old rule meant that the consultant “can refer someone to a product that gives [the broker] a higher commission at the expense of the client’s profits. This is not true.”
In the future, the advisor will have fiduciary responsibilities. In other words, he or she must act in the best interest of the client and place this responsibility ahead of the personal benefit of the broker.
The new rule is due to be fully implemented in 2018 and looks set to make it easier to find reliable financial assistance. In the meantime, this is a helpful reminder that you must select a professional to work in your best interest. Check out the full story at the link below.