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The DOL Fiduciary Rule’s Unintended Consequences

Retirement Funding Insights

The Department of Labor’s Fiduciary Rule partially goes into affect tomorrow. I say partially because “enforcement” of the rule will be delayed until January 1st, 2018, if the Rule isn’t completely cancelled before then.

The rule is designed to require brokerage firms to disclose conflicts of interest inside IRAs, such as getting a fee for the management of an IRA, but also investing the IRA money in an investment that pays the firm or the advisor as well. That’s called double dipping.

Disclosing conflicts like the above sounds good, doesn’t it? However, this rule is a typical example of how the Federal Government means well, but completely misses the point. You see, the Rule only applies to IRAs. So what about non IRAs such as taxable investment accounts, 529 plans, trusts, annuities, CDs, etc? The Department of Unintended Consequences, if it existed, would have a field day with this one.

Here’s the unintended consequence of the DOL Fiduciary Rule. In response to the Rule, instead of disclosing fee conflicts, many big brokerage firms are simply not allowing brokers to receive commissions or fees on IRAs. The net affect of this will be that the average American IRA investor will not get good advice or investment management on the biggest asset they own besides their house, because brokers won’t get paid for it.

The rule could actually make things worse for the average investor.

So what should you do about this? You could work with an independent RIA. As a reminder, Registered Investment Advisory (RIA) firms such as Wright Financial Group LLC have always been required to act as fiduciaries, for IRAs and non-IRAs.

Read about the benefits of working with an RIA.

Tom Wright & Next Investments © 2017

(804) 591-1657