New Treasury Regulations Impose Heightened Standards for Retirement Fund Advisors

By Anthony J. Cox, Esq.

Financial advisors and financial services firms are facing new scrutiny, as indicated by a recent rule change by the U.S. Labor Department. In early April 2016, the U.S. Labor Department issued new regulations requiring that brokers and financial services firms act in the best interest of their clients when handling individual retirement accounts (commonly called IRAs) and 401(k) accounts.

Most investors probably assume that their financial advisors have been working in their best interests all along, and that may be true in many cases. But some advisors have failed to deliver on that promise, choosing to offer advice that may prioritize their profits over client service when there is a conflict between those objectives. As reported by Tara Siegel Bernard of the New York Times, Labor Secretary Thomas Perez puts it this way: “The marketing material that I see from many firms is, ‘We put our customers first.’ This is no longer a marketing slogan. It’s the law.” The regulations establish a totally new standard which obligates advisors to act as fiduciaries and requires that they seek an exemption prior to accepting payments that would result in a conflict of interest between them and their clients.

Some are predicting that the new regulations are just the first step toward new standards of accountability and transparency throughout the world of financial services, not just in the sphere of retirement investment. Investors and advisors alike should become familiar with the new regulations and the changing climate in the world of financial services to ensure that they are receiving, and providing, advice that conforms to the requirements of the law.