A new rule proposed by the Department of Labor brings attention to the need to put together a comprehensive plan to protect your wealth.
Saving for retirement is a process that, ideally, begins when we enter the workforce. Managing these earned retirement assets and taking steps to
preserve one’s wealth are key steps towards setting up for financial success through the golden years. Another important step involves awareness of changes that could impact these carefully made plans. One such change was recently announced by the Department of Labor.
Department of Labor announces proposed rule
The Department of Labor (DOL) released its Conflicts of Interest Proposed Rule on April 20, 2015. The rule is designed to provide a revised definition for the term “fiduciary.” Ultimately, the goal is to protect retirement plan holders from retirement advisors that are focused on monetary gain instead of better ensuring sound investments for retirement plan participants.
Unfortunately, advisors do not always put the needs of their clients ahead of their own financial interest. A recent report by U.S. News & World Report delves into the issue, noting the DOL believes advice from these advisors has led to an estimated loss of $17 billion in losses every single year.
The rule defines the term “fiduciary” as it is used in an employment benefit plan under the Employee Retirement Income Security Act of 1974 (ERISA) as well as the use of the term for individual retirement accounts (IRA) under the Internal Revenue Code of 1986. The rule is needed since retirement investments have evolved since the term was originally defined in 1975. The regulations issued in 1975 resulted in a very strict definition of the term fiduciary, and the new, proposed rule is intended to broaden the scope of the term, thus offering more protection to those who are receiving guidance from these advisors. If passed, the term “fiduciary” in these instances would extend to include most investment professionals, consultants and advisors that play a critical role in guiding retirement investments.
Critics of the proposal state that a loophole could “gut the rule.” The article in U.S. News notes that the rule allows an exemption for broker-dealers and insurance companies to continue to receive commissions as long as they disclose conflicts of interest. Those who oppose the rule state that this loophole puts the burden on the participant to ensure that the recommendations they are receiving from their advisors are in the participant’s best interest, not the advisors.
Protecting your wealth
It is important to note that this proposal is not yet official. However, navigating changes like this proposal that could impact your wealth is an essential step towards better ensuring that your assets are protected. In addition to protecting your retirement, it is also wise to put together a comprehensive wealth preservation plan to protect all of your assets. This plan could include the use of trusts and other legal tools to better ensure your assets are protected. Contact an experienced wealth preservation lawyer to discuss your options.
Keywords: Estate planning