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You may have lost money in your investment portfolio,
due to mismanagement and not even know it.

Who is ready for the new fiduciary rule? Consumers.

The U.S. Department of Labor's (DOL) new Fiduciary Rule or Conflict-of-Interest rule, seeks to stamp out mismanagement of your retirement savings accounts by forcing more investment professionals to act as fiduciaries, making clear statutory language requiring them to put their clients' interests above their own.

Not surprisingly, many brokers and financial firms are passionately opposed to the new rule, particularly because of the cost of implementation and compliance.

The final fiduciary rule

Currently, investment advisers perform under a lower standard when advising their clients. The new Rule raises that standard to include the more stringent fiduciary duty. It directs any and all investment advisors that receive compensation for providing financial advice and recommendations on individualized investments to Individual Retirement Account owners or retirement plan participants to adhere to a higher fiduciary standard - putting their client's best interests above their own.

Essentially, a fiduciary duty means that when you are a client seeking this type of advice, these professionals must act solely in your interest when counseling you on your retirement accounts. This should serve to reduce poor recommendations that hurt you, but benefit the advisor due to financial incentives. This new duty extends to advice on your retirement plan distributions and assets as well. There are various exemptions in place where a fiduciary relationship is not appropriate.

A best-interest contract (BIC) exemption is also included in the new Rules. This addresses the expansion of the fiduciary standard to those financial professionals who receive commissions and other compensation, which would typically present a conflict.

In these instances, your broker must sign a contract that states he or she is putting your best interests first and clearly advise you of all benefits and costs of decisions. This BIC will allow you to bring a private action against the individual and financial institution if they breach this contract.

Essentially, this new rule should result in better financial advice for you and other retirement savings account participants and owners, because those individuals giving you advice must do so with only your benefit in mind -- rather than any financial gains they might earn by directing or advising you to invest a specific way. Additionally, they will now be forced to charge you a specific fee, making the cost to you far more transparent. The result, says the DOL, is that it will save families in the U.S. at minimum $40 billion in the next 10 years.

The opposition

The DOL published this final rule in the Federal Register on April 8, 2016. Normally, the rule would become effective 60 days after its publication. However, the DOL is giving financial service firms additional time to implement the changes they require to conform with the new rule. Therefore, it won't become effective until April of next year.

In the meantime, firms have been lobbying against the new rule, claiming that it will have a much bigger impact than anticipated and that it will be an extremely costly change. This is likely true for those financial advisors who have long relied upon big commissions and high fees. For them, they will need to revise their business model to serve the best interests of their clients or lose their business to competitors who will adapt properly.

If brokers and others who give advice think compliance is a burden, they should think about it from the consumer's perspective. It isn't easy to spot fraud or bad advice that crosses legal lines. That is why it is ok (and encouraged) for consumers who suspect bad behavior to ask about it.

Who do they ask? A law firm that knows how to diagnose investment fraud. No case, no problem, but don't forgo getting relief you may deserve.

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