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Watch out before you seek advice.
You may believe that those calling themselves investment advisors are obligated to act in your best interest and, accordingly, you may not think twice about placing your trust and hard-earned retirement savings in the hands of those advisers. The truth is that many advisers have no legal obligation to act exclusively in their clients’ best interest. Some advisors, in fact, may steer you away from the best choice – the one that is best for you – and instead direct you into investments that make more money for them and their firm, and less for you.
Some agencies have implemented rules for investment advisors, but they have been overturned or aren’t strong enough.
Back in 2016, the Department of Labor issued a regulation that would have made all people who give investment advice (or advice about whether to take a lump sum payment) fiduciaries under federal law. But that regulation was later overturned.
The Securities Exchange Commission recently issued its own weaker rules requiring registered investment advisors to maintain certain fiduciary obligations when dispensing advice. But the rules applicable to investment advice given by certain broker/dealers are much weaker and do not require them to put your interest first.
Given the existence of weak legal protections for investors, it’s important to remember that when you seek investment advice you must make sure you are getting it from someone who is competent and isn’t putting their interests first. You should always ask prospective advisers to give you assurance in writing that the advice they offer will be in your best interest – not theirs.
One way to ensure this is to demand that any advisor you use commit to and sign the fiduciary pledge created by the Committee for the Fiduciary Standard. Acquiring such protection could prevent you from paying unreasonably high fees or from unwittingly being steered into investment strategies designed primarily to benefit an adviser who has a potential conflict of interest.
In today’s challenging pension environment, our work is more important than ever. Your contribution will help make it possible for the Center to continue its crucial role as a national consumer organization committed to protecting and promoting retirement security.