How a New U.S. Rule Might Protect You From Dodgy Retirement Advice

More than a year after the White House endorsed a Department of Labor proposal, which would force financial professionals working with retirement investors to adhere to the fiduciary standard, the final rule is set to be announced on April 6.

As a reminder, “fiduciary” is a fancy way of saying that a financial professional must put your needs first and must pledge to disclose and manage any conflicts of interest that exist. For example, if the adviser recommends an insurance policy and offers to sell it to you, she must tell you if she receives any compensation for doing so. Investment professionals who are not fiduciaries are held to a lesser standard, called “suitability.” That standard means what they sell you has to be appropriate, though not necessarily in your best interest.

The new rule will require everyone providing retirement investment advice to be held to the fiduciary standard -- which, again, means that they must provide impartial advice in their client's best interest and that they cannot accept any payments creating conflicts of interest unless they qualify for an exemption intended to assure that the customer is adequately protected.

Not sure whether your financial professional is held to the fiduciary standard? The easiest thing to do is to ask. But there are also certain designations that require that the professional adhere to the fiduciary standard:

• Certified Financial Planner Board of Standards (CFP Board) certification
• CPA Personal Financial Specialist (PFS) certification
• Chartered Financial Analyst (CFA) certification
• Membership in the National Association of Personal Financial Advisors (NAPFA):

During the new rule's comment period, many big firms fought back against the fiduciary standard, arguing that the new rules would make it prohibitively expensive to serve customers with smaller accounts. But companies that take that position -- arguing that working in their clients’ best interest is not good business -- may soon find that their customers will go elsewhere.

After all, don't you want to be assured that the fiduciary standard is not only enforced, but embraced?