A New Year’s prediction: 2016 will be a very good year for retirement investors. Not because the stock market will be strong – if anything, we’re headed for a rocky ride. But 2016 is shaping up as the year when investment advisers will at long last be required to put your best interests ahead of their own.
The U.S. Department of Labor is putting the finishing touches on the so-called “fiduciary rule,” – a geeky-sounding phrase that actually will mean a great deal to anyone with a 401(k) or IRA.
The fiduciary rule will reshape the retirement advice business. It will require banks, brokers, mutual fund companies and insurance agents to keep your interests at heart by keeping fees low and protecting your savings from excessive risk when they advise you on investments. They’ll be on an even playing field with registered investment advisers – who already have fiduciary duty – driven by cost and performance – not how much the firms themselves can earn in commissions.
Opponents of the fiduciary rule in the financial services industry last month took their best shot at stopping the Labor Department by trying to add a rider to the omnibus federal spending bill passed by Congress that would have halted the rule-making. They failed. President Obama is ready to veto any subsequent legislation aimed at stopping the process, and the Labor Department is on track to publish its final rule this year. Implementation could take another year or two.
If you doubt that we need this regulation, consider this headline from just before the holidays, the case of JPMorgan Chase & Co. Just before the holidays, the largest bank in the United States agreed to pay $307 million to settle accusations by the U.S. Securities and Exchange Commission (SEC) that brokers and advisers in several JPMorgan divisions steered clients into its own, more expensive investment products over other choices without making the required disclosures about its conflicts of interest to clients. The bank will pay $267 million to the SEC, and $40 million to the Commodity Futures Trading Commission, which also conducted an investigation.