Investors need fiduciary rule for protection

The Savage Truth

The Department of Labor's fiduciary rule is in danger. And if you're an investor, that should scare you.

The fiduciary rule is simple. It says anyone selling investment products to people with money in retirement accounts must put the client's interest first, and must fully disclose all costs, fees, commissions, rebates and benefits from selling the product.

President Trump has ordered that the rule be reviewed. If it's killed, which is likely, that opens the door for high-pressure salespeople to peddle inappropriate and cost-heavy products that could devastate your retirement account as you roll that hard-earned money from a company plan into an IRA.

If you think the rule isn't needed, here are just two of the complaints and questions I've received from readers:

“I attended an annuity seminar. (The salesman) promised much higher rates than I could get in a bank account. But he says I have to sign the annuity contract tomorrow or this high-rate deal will go away. What should I do?”

Savage says: Don't rush into anything. The push is a signal that this person is getting a big commission from this deal.

“I was told it was a ‘managed account' and they would only charge 2 percent a year to manage it professionally. Is that too much?”

Savage says: Way too much, plus you're likely paying commissions and management fees on the underlying products.

When the fiduciary rule was proposed, the financial services industry was in an uproar. Suddenly, a lot of fat commissions and ongoing fees would be eliminated as people learned how much they were paying for these products.

A recent Mercer study quoted by Jack Bogle, founder of Vanguard, estimated Wall Street would lose $20 billion in fees and commissions in the next few years if the fiduciary rule were to go into effect, not to mention the cost of compliance.

Some major mutual fund and brokerage firms were ready to comply with the order. Vanguard, Fidelity and Schwab set up systems to comply with the fiduciary rule and are ready for its promised start in April.

There definitely are responsible financial advisers and brokers out there who have always put their clients' interest first. And there are some managed accounts and annuity products that are low cost and can be helpful in balancing your portfolio. But the odds are against you finding them.

With trillions of dollars now being rolled out of 401(k) plans as workers retire, there is a small army of salespeople ready to grab those large lump sums and rip you off with their investment recommendations.

Please investigate before you invest. Go to to learn what you should be asking a financial adviser before opening an account — and to check on the regulatory history of brokers and investment advisers.

It can be smart to roll over your retirement account to a low-cost firm like Fidelity, Vanguard or T. Rowe Price, where they will give you free advice about diversifying your retirement rollover account and provide the lowest-cost investments. And that's the Savage Truth.

Terry Savage is a registered investment adviser and the author of four best-selling books, including “The Savage Truth on Money.” She responds to questions on her blog at

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