Ask For a Fiduciary Standard of 401(k) Advice

Make sure your 401(k) advisor is a fiduciary.

, I wrote about the new Department of Labor regulations regarding improving all Minnesota company retirement plan participant’s access to investment advice in the management of their company retirement plan accounts.

As I stated earlier, this is great news. Any level of professional investment advice will in most cases improve the long-term investment performance in every available type of company retirement plan account—401(k), 403(b) or 457(b).

The new regulations have guidelines that need to be followed by the company or financial professional who provides the investment advice.  But as all investors know, companies and individuals work very hard to get around existing laws and regulations. Many times financial companies succeed in taking advantage of individual investors who are unaware of what protections are available to them.

The new retirement plan advice guidelines are set to take effect beginning in late December.  You can bet that both company retirement plan providers and individual financial professionals are already hard at work on details of their new “offer” to provide advice to individual company retirement plan participants.

The company that provides your company retirement plan (called the company retirement plan provider) and the financial professional who sold your company retirement plan to your company (most times called the broker of record) will both be very interested in the additional investment advice revenues that have the potential to come their way in the future from existing company retirement plan customers.

As you review these new offers for investment advice on your company retirement plan menu, make sure you remember to ask the company or individual the most important financial advice question of all.

The question is, “Are you willing to assume the role of a fiduciary advisor to me with your investment advice regarding my company retirement plan account?”

There is a huge difference between a financial services company and an investment professional who wants to “sell you something” and a fiduciary advisor.  Compare it to the difference between an apple and an orange.

A fiduciary advisor is legally obligated to only offer investment advice that is in the best interest of his or her clients. A fiduciary advisor is totally free from any conflict of interest in regard to their client’s accounts.

A fiduciary advisor does not “sell” investment products or investment advice.  A fiduciary advisor gets paid advisory fees that are based on the investment performance of his or her client accounts.

So be careful when the offers for company retirement plan advice start to roll in.  And remember the word fiduciary.

Ric Lager
Lager & Company, Inc.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Wall Street Ranter November 13, 2011 at 01:06 AM
All for expanding who is considered a fiduciary, HOWEVER, this can't do anything about the TYPES of fiduciaries that are out there. Here is the Current Fiduciary Landscape in the Financial Industry (In a simple pie chart) http://www.wallstreetrant.com/2011/11/current-fiduciary-landscape-in.html


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