Do you Have an Advisor?

From the October 2017 issue of Hark!

Studies show that people who speak to an adviser experience better investment outcomes, amassing greater account balances by retirement. If you decide to use the services of an adviser, there are some questions you should ask.

What type of adviser do you want to consult?

There are three main types of advisers:

  • Registered representatives—stockbrokers, investment and bank representatives—who generally earn commissions or fees for investment and insurance products.
  • Financial advisers—Registered Investment Advisors (RIAs) and Investment Advisor Representatives (IARs)—who earn commissions and/or other fees linked to the investments held by their clients. Since they are financial fiduciaries, they are held to the highest ethical standards in the financial services industry.
  • Financial planners—who generally charge a fee for services.

What about fees?

Some payment arrangements can create conflicts of interest. For example, if your adviser’s earnings are linked to your investment performance, he or she may take more risks than you might be comfortable with or, if your adviser earns commissions on products you purchase, they may recommend products that will earn them the highest fees, even if they are not the best possible option for you. Make sure to choose an adviser you trust to act in your best interests.

What about the fiduciary rule?

The Department of Labor Fiduciary Rule requires advisers providing retirement advice to adopt a “fiduciary standard,” which mandates they “act in the best interests of their clients, and to put their clients’ interests above their own.” This standard applies to those advisers who were formerly only obligated to meet a “suitability standard.” The suitability standard only requires that an investment recommendation meet a client’s defined need and objective to be deemed appropriate.

The Fiduciary Rule may not apply to all of your investments. It only applies to tax-advantaged retirement accounts [e.g., 401(k)s, 403(b)s and IRAs]. Also, existing retirement investments may be grandfathered, meaning that the fiduciary rule does not apply.

How can Wespath help?

Wespath offers unbiased, confidential financial planning at no additional cost through EY Financial Planning Services, a leading professional services firm.* EY financial planners are fiduciaries and are required by law to act in your best interest. They have always provided participants with conflict-free, objective financial guidance. EY does not sell investment or insurance products and they do not earn commissions. Get started with your no-cost EY consultation, by calling EY at 1-800-360-2539. Representatives are available business days from 8:00 a.m. to 7:00 p.m., Central time.

Additional information about evaluating potential advisers appeared in the October 2014 issue of Hark!

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