Fiduciaries
DEAR TRUST OFFICER:
I’ve heard something about a new “fiduciary rule” for retirement advisors. What does that mean? What does it mean for me? — FOLLOWING THE NEWS
DEAR FOLLOWING:
In general, the Securities and Exchange Commission provides the rules governing the conduct of investment advisors. In May, the Department of Labor added a new rule, pursuant to ERISA, for advisors who provide advice to retirees, in particular those retirees who are rolling their retirement money from a 401(k) or similar plan to an IRA. Such advisors will now need to put the interests of their customers ahead of their own, the essence of fiduciary obligation, which is more strict than the earlier rule that the advice must be suitable. The purpose of the change to eliminate or at least disclose any conflicts of interest, including the compensation that the advisor may receive associated with the advice.
The change sounds small, but Morningstar projected that retirees may save $55 billion over the next ten years in fees as a result of the new rule [“The Final DOL Fiduciary Rule Has Arrived. Here’s What It Means for Investors,” April 26, 2024]. On the other hand, past attempts to impose fiduciary obligations on advisors have been successfully challenged in court, so it is not certain that the new rule will go into effect on schedule, on September 23 this year.
By the way, trust departments have always been fiduciaries, and have always adhered to an extensive list of fiduciary duties. We’d be pleased to explain in detail, if you are interested.
Do you have a question concerning wealth management or trusts? For any inquiries, please contact us.
©M.A. Co. All rights reserved.