As if talking to your financial adviser isn’t confusing enough, the possible rollback of the fiduciary rule that requires financial professionals to work in a client’s best interest may make it more complicated.
President Trump has told the Labor Department to delay its fiduciary rule until at least June 9, 2017, with some exemptions extending through Jan. 1, 2018.
The fiduciary rule required that advisers work in the best interest of their clients and to put their clients’ interests above their own. The rule could also eliminate many commission structures for advisers, or at least detailing a potential conflict of interest — such as receiving a higher commission for selling a certain product.
For many people, the main discussion they ever have with a financial adviser is about their retirement fund. These can include annuities, an actively managed mutual fund, real estate investment trust and other possibly confusing investments.
Here are some questions to ask your financial adviser about their fees, no matter what ends up happening with the fiduciary rule:
How much commission will you earn now if I buy this product? Will you earn more later if I keep the product longer?
Are you earning more by selling me this product than you would from a similar product from a different company?
Do the companies you work with offer “due diligence” trips? These are trips where you spend an hour learning about the product and the rest of the day on the golf course.
Any other bonuses you might get from a financial company for selling me something? Points you can redeem for merchandise? Dinners at top restaurants? Courtside basketball tickets?
If I buy an annuity and elect to receive a sign-up bonus, how much extra will I pay in fees? Or how much will I sacrifice in returns or payouts?
Are there separate management fees, trading fees, record-keeping or other administrative fees for anything I’m buying? I’d like an itemized list of all fees.
Has your firm favored one product or locked out others?
As you can tell from the above questions, many of your questions should be about fees you’re paying for the financial services you’re asking about, and if the adviser or their firm has a financial stake in recommending one over another. Or not recommending one at all because it doesn’t provide a big enough commission.
If financial advisers aren’t legally and ethically required to have your best interests in mind, then it’s up to you to keep them on their toes anyway by asking a lot of questions. Be prepared for a long meeting.
Feel free to contact me for more information.