Bellevue Certified Financial Planner Steve Juetten is worried about the false sense of security some people will have after hearing about the new Department of Labor rule, which requires advisers who work with retirement plans and IRAs to be “fiduciaries.”
Certified Financial Planner professional and Bellevue, Washington Financial Adviser Steve Juetten is worried about the false sense of security some people will have after hearing about a new Department of Labor regulation.
On April 6, the Labor Department published a new rule that requires advisers who work with retirement plans and IRAs to be fiduciaries. According to Juetten, a fiduciary is someone who always puts the best interest of their client first and operates with fee transparency. But, as he cautions, the new legal guidelines muddy these waters and make it easy for pretty much any adviser to call themselves a fiduciary. This makes it more dangerous for the average person because it will be more difficult to identify when an adviser is truly acting in an investor's best interest.
Juetten believes that the Labor Department bowed to intense industry pressure and watered down the new regulations to the point where they are almost pointless. While he believes the intent of the regulations is positive, the way the rules were written basically allows any adviser to keep doing what they've always done and claim they are following the fiduciary rules.
Juetten believes that the new law is a good thing for the companies that sell investment products and provide financial services more so than for investors. Stock prices for brokerage firms like Ameriprise jumped almost immediately after the guidelines were published. The stock of LPL, the largest independent broker/dealer in the county, shot up 7% at one point on the day the regulations were announced.
Juetten cautions investors about what he sees as a number of flaws in the new Labor Department guidelines.
• The new rules only apply to an adviser when they are giving advice to participants in retirement plans like a 401(k) plan or an individual retirement account. Juetten observes that if an adviser is making recommendations about a brokerage account, the adviser does not have to act in the client's best interest. The adviser only has to recommend what is 'suitable' for the investor. This is a vague and dubious standard Juetten says.
• Juetten warns that the new regulations don't go into effect for at least a year. Some parts of it start in April 2017 and some parts start in 2018. In the meantime, it’s the usual buyer beware approach.
• The new rules allow an adviser to be paid in a variety of ways that are not easy to decipher or understand. For example, under the new rules advisors can be paid with commissions or in other sales-based ways and still claim to be a fiduciary.
• Juetten says that the new guidelines give advisers wide latitude to recommend whatever they want to a retirement client as long as they meet some very low standards. He warns investors to be wary and ask lots of questions about fees and expenses.
Juetten states that most investment products like complex annuities that were sold to un-wary and un-suspecting clients before the new guidelines, are still going to be sold. Advisers are free to sell pretty much anything they want as long as fees aren't egregious and conflicts are disclosed. Juetten wonders how an average investor will be able to determine if fees are fair and doubts they'll read the small print on disclosure documents.
About Certified Financial Planner Professional and Ditch the Guesswork Author Steve Juetten: Steve Juetten is a CERTIFIED FINANCIAL PLANNER™ professional and the author of the newly released and favorably reviewed book titled Ditch the Guesswork: Creating Reliable ROI for Time-Starved Investors. He has been advising busy working professionals how to take care of their money so they can do more of what they love since 2002. Juetten has contributed expert insights to Bankrate.com, PBS.com, Forbes.com, MSNMoney.com, FOXBusiness.com, and the Puget Sound Business Journal. Seattle Magazine has awarded Juetten a FIVE STAR WEALTH MANAGER honor for five years in a row based on client votes of satisfaction. Learn more and engage at www.finpath.com. >> To schedule interviews with Steve Juetten, call 425-373-9393 or send email to [email protected] >> To sample the first two chapters of the book, visit www.ditchtheguesswork-pinkspoon.com.