THE SOLUTION
What would the Department of Labor Retirement Security Rule do?
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The DOL Rule would close current regulatory loopholes: ​
It would cover rollover recommendations to ensure that retirement savers receive strong protections when they are most vulnerable to receiving conflicted advice that harms their financial security.
The Rule would apply to all retirement investments, including not only securities but also non-securities such as many insurance products and a wide range of other investments not currently covered.
The Rule would cover advice to employers who sponsor 401(k) plans to ensure that the advice they receive about the menu of 401(k) plan investment options they should offer to their employees is not tainted by conflicts of interest.
The Department's final rule provides that a financial services provider will be an investment advice fiduciary under federal pension law if:
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the provider makes an investment recommendation to a retirement investor;
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the recommendation is provided for a fee or other compensation, such as commissions; and
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the financial services provider holds itself out as a trusted adviser by
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specifically stating that it is acting as a fiduciary under Title I or II of ERISA; or
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making the recommendation in a way that would indicate to a reasonable investor that it is acting as a trusted adviser making individualized recommendations based on the investor's best interest.
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The Rule is designed to ensure that ERISA's fiduciary standards uniformly apply to all situations where retirement investors reasonably expect that their relationship with an advice provider is one in which the investor can—and should—place trust and confidence in the recommendation.
That means:
If you leave a job and need advice on whether to roll your 401(k) over into an IRA, the financial professional will have to analyze your former employer’s 401(k) and the available IRA alternatives to determine whether rolling over your money is best for you.
Any advice you receive about how to invest the money in your 401(k) or IRA will have to be based on sound investment principles and your specific financial situation. In short, it will have to be based on what is best for you, not what earns the most in commissions and fees for the adviser.
If financial professionals put your interests first, your costs should come down and your investment performance should improve. Over the long term, that could add up to tens or even hundreds of thousands of dollars in additional retirement savings.