New Fiduciary Rule Sets Parameters for Giving Retirement Savings Advice

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Fiduciary Rule Updates

The Department of Labor (DOL) issued last week its final fiduciary rule that will affect how financial professionals advise their clients about retirement savings. The announcement will bring more investment advisors, brokers and other agents under an existing rule known as the fiduciary standard which requires financial professionals to put their clients’ best interests ahead of their own profits.

As reported by CNBC on April 6, currently, only financial professionals or firms registered with the Securities and Exchange Commission or individual states follow the rule. The broader definition will need to be followed as of April 2017, according to the DOL.

Financial professionals offering investment advice for retirement accounts such as IRAs, Roth IRAs or simple IRAs will be required to the follow the rule. Additionally, the new DOL definition of the IRS term – fiduciary – will include advisors and brokers who give advice about health savings accounts. Many individuals age 55 and older have HSAs with a high deductible health plan and use the account as an additional savings mechanism in their portfolios.

The National Association of Insurance and Financial Advisors (NAIFA) worked with the DOL to have several concerns addressed after reviewing the initial draft rule. In a statement released April 6 by NAIFA president, Jules Gaudreau, he notes that they are completing an in-depth analysis of the rule and will continue to provide training and education to help their members deal with the rule’s new requirements.

As an aging population with an extended lifespan continues to grow in the U.S., this new rule looks to ensure people get appropriate advice on how to invest their retirement savings as it will need to last them a long time.

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