New Administrations bring new rules – or, in this case, they do away with the old ones. One of the regulations on the chopping block is the so-called “fiduciary rule” issued last year by the Labor Department, which said that both financial advisors and brokers who worked on 401(k) and other retirement accounts had to act in the best interests of their clients. It is set to go into effect this April.
However, as the New York Times reports, “the rule is likely to disappear, given that Gary Cohn, the former Goldman Sachs executive who is now the director of the National Economic Council, told The Wall Street Journal that he wanted it gone.” While Registered Investment Advisors will still have fiduciary duty, brokers and brokerage firms will only be held to the suitability standard – which, in the Times’ opinion, “leaves lot of room for shenanigans.”
We have discussed the difference in these standards, because the terminology can be challenging to understand if you are a novice investor, or if you do not work in the securities filed in some way. We invite you to read more about it here.
The reasoning behind the potential reversal
In the same Times, piece, Mr. Cohn stated that the rule reduces or eliminates the choices investors have when it comes to how they wish to invest their funds. Another concern is the cost to investors “if firms responded to the rule by forcing them to pay fees based on the amount of assets they had with the company instead of commissions based on the number of trades their broker made.”
However, WSJ reports that “even if the rule is undone, many in the financial-services industry say its tenets were becoming the industry standard, as many Wall Street firms have taken steps to comply and advertised their commitment to acting in clients’ best interest.” Merrill Lynch plans to continue to implement the changes it prepared for in regards to the rule, though other powerhouse investment firms, such as Edwards Jones, UBS and JPMorgan Chase, have remained rather close-lipped about the potential reversal.
Protecting yourself from investment fraud
Retirees need to be vigilant, whether the rule comes into fruition or not. You have rights, and there are some steps you can take to protect yourself from investment fraud:
- Research any broker who cold calls you with a new investment plan.
- Use BrokerCheck® by FINRA to see the background of your current investment firm, or of anyone you may consider investing with later.
- Familiarize yourself with your rights as an investor.
- Demand accountability from your firm, your advisor or your broker by requesting and reviewing documentation related to your accounts.
- Report any instances of wrong-doing to the appropriate organization.
If you believe you have been the victim of stockbroker negligence of fraud, or if you have sustained losses, you may be entitled to damages. At The Frankowski Firm, we help investors throughout the country who have been hurt by their brokers and advisors. To learn more about FINRA arbitration, or to speak with an experienced broker fraud attorney, please call 888.741.7503, or fill out our contact form.