Few Americans know how to ask their financial advisors the right questions about fees and conflicts of interest. The federal debate between Regulation Best Interest (Reg BI) and the DOL Fiduciary Rule (also called the 澳洲幸运5官方开奖结果体彩网:Retirement Security Rule) highlights the need for clarity.  

On April 23, 2024, the U.S. Department of Labor (DOL) took a major step to protect the retirement accounts of Americans, like 401(k)s and IRAs, by updating these existing guidelines. The additions and changes to the 澳洲幸运5官方开奖结果体彩网:Prohibited Transaction Exemptions (PTEs) and the updated fiduciary definition take effect on Sept. 23, 2024. There is a one-year transition period after the effective date for certain conditions in the PTEs.

The Impact of Hidden Fees

Convenience, processing, early termination, transfer, and service fees are “junk fees" that affect all aspects of the economy. Junk fees are defined as fees that increase the price and add no services or value to the product. They can impact retirement account returns significantly over time. The range for 澳洲幸运5官方开奖结果体彩网:401K fees is betweꦕen 0.5 and 2%. For example, a 1% differ🐬ence in fees can reduce a 401(k) balance at retirement by 28%.

The Difference♏ Betw🃏een Best Interest and Fiduciary

Regulation BI requires broker-dealers to act in their customers' best interest, but fiduciaries are legally obligated to prioritize their clients’ interests, provide prudent and loyal advice, and avoid misleading statements.

The new rule will expand the fiduciary responsibilities to cover purchasing securities like mutual funds, new types of non-securities like fixed index annuities, advice to employers and plan fiduciaries, and one-time advice for transactions like 澳洲幸运5官方开奖结果体彩网:401(k) rollovers.

What I’m Telling My Clients 

Get to know your financial advisor and ask if they are a fiduciary. Reseﷺarc📖h your advisor and the firm via to see if they hold a Series 65 or have professional designations like CFA or CFP. 

Review your 澳洲幸运5官方开奖结果体彩网:prospectus and see how much your 401(k) and IRA accounts cost. The U.S. Department of Labor requires 401(k) providers to disclose all fees in a prospectus you receive when you enroll in a plan, and it must be updated annually.

The Bottom Line

A great time has arrived when financial advisors are required to put the client's interest ahead of their own. Under the new rule, fiduciary responsibility continues to expand, and removing junk fees could save Americans billions in retirement savings. The continuous cut in advisory fees will require advisors to find new ways to add value to clients.