What the Department of Labor Fiduciary Ruling Means to You

You may have heard about the Labor Department’s so-called fiduciary rule, which requires brokers and others who give retirement advice to act in their clients’ best interests, where previously their advice just had to be “suitable” for a retirement investor.

So how could this ruling affect you? Well, it could do so in many ways, but here are three important ones:

First, you could see a uniform fiduciary standard, with levelized compensation being the front-runner for how advice is executed on retirement accounts. What this means, basically, is that broker-dealers and investment advisers would be subject to a uniform standard of conduct when providing personalized investment advice about securities to retail investors.

Second, smaller investors could be challenged and they may pay higher fees if they want to seek the advice of a financial advisor. The reason for this is that the increase in liability, as it’s been proposed, may discourage some advisors from taking a rollover IRA that’s too small for the risk and the compensation, which could, in turn, force some investors with smaller account sizes to fend for themselves or find an online solution.

Third, you should expect to participate more in the financial planning process with your advisor from now on. And this makes sense. If you as a client are actively engaged with the advisor and his or her recommendations, you’re more likely to understand what’s being presented to you and the advisor will be less likely to shortcut the advice to sell you a product.

The DOL ruling means more people will be doing more financial planning, and that’s a very good thing, because the stats and studies that I’ve seen show that a client with a financial plan does better than a client without one. In fact, a 2011 HSBC study called The Future of Retirement showed that those with financial plans accumulated nearly 250% more retirement savings than those without a financial plan.

This ruling will force financial advisors in the industry to raise their A game and to get more education and professional designations, which is exactly what we’ve always done here at Lucia Capital Group. We take a strategy-first approach, with almost every financial planning designation represented within our organization: CFA, CFP, CPA, ChFC, PFS etc. Achieving your retirement goals is just as important to us as it is to you, and that’s what we aim to do. Give us a call. We’re here to help.

Information presented should not be considered specific tax, legal, or investment advice. You should always seek counsel of the appropriate advisor prior to making any investment decision. All investments are subject to risk including the loss of principal.

No client or prospective client should assume that the information contained herein (or any component thereof) serves as the receipt of, or a substitute for, personalized advice from Lucia Capital Group, its investment adviser representatives, affiliates or any other investment professional.

IRA withdrawals will be taxed at ordinary income rates. Withdrawals prior to age 59½ may also be subject to a 10% penalty tax.

Raymond J. Lucia Jr. is chairman of Lucia Capital Group, and CEO of its affiliated broker/dealer, Lucia Securities, LLC, member FINRA/SIPC, which is a subsidiary of Lucia Capital Group. Advisory services offered through Lucia Capital Group, a registered investment advisor. Securities offered through Lucia Securities, LLC, member FINRA/SIPC, and an affiliate of Lucia Capital Group. Registration with the SEC does not imply a certain level of skill or training. CAA-10770

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