How to find financial advice you can trust
The Department of Labor recently announced it will postpone putting the “fiduciary rule” into effect. And the Trump administration has signaled it wants to get rid of it altogether.
The fiduciary rule stipulates that financial professionals who advise you on your retirement accounts must put your financial interests ahead of their own. Without the rule — and as things currently stand — they could push certain products ahead of others (whether or not they are the best fit for you) because they earn a higher commission, for example.
Of course, even without the rule in place, it’s still possible to get good, unbiased and customized financial advice. But in most cases you’re going to have to pay for it.
One option: Do it yourself
Don’t overlook the possibility of managing your own affairs. The happy truth is that some of the simplest and cheapest approaches to investing tend to have the best performance over time. I’m talking about buying low-cost index funds, keeping a regular savings habit, paying down debt, and avoiding lots of transactions.
You don’t need complicated investment vehicles or hot stock tips to do well in retirement. The big advantage to managing your own money is that you will have a better idea of what’s going on. And, in the end, no one has your interests closer to heart than you do.
Another: a fee-only adviser
But everyone runs into occasional situations where they need more detailed help from a human being. Especially with the complicated financial lives people are leading today. In those cases, a fee-only financial planner or adviser is what you are looking for.
“Fee-only” is different from “fee-based.” [Fee-based advisors may charge some direct fees, perhaps a fixed percentage of the assets they manage, but are also compensated through commissions they earn on purchases and sales they make on their clients’ behalf. To the extent fees are based on commissions, this could lead some advisors to buy and sell more frequently, or to select certain high-commission products, in order to earn more money.]
In contrast, fee-only advisers earn their income solely by charging their clients, and pledge voluntarily to follow a version of the fiduciary rule and always to act in their clients’ best interests. This is exactly the rule that the Department of Labor is seeking to throw out.
Fee-only planners don’t have to be expensive. Some advisers will accept a small monthly or annual retainer. It could be as low as $100 a month.
Others work on an hourly or project basis. This might make sense if you are facing a life transition. Say one partner in a couple wants to start staying home with the kids. Or there is a divorce or retirement on the horizon.
You want someone — ideally, a certified financial planner or CFP — with many good references from satisfied customers. You can see if anyone has an official complaint filed against them by looking on the Securities and Exchange Commission website at https://adviserinfo.sec.gov/ IAPD/Default.aspx.
There are several networks of fee-only advisers, such as the Garrett Planning Network, the XY Planning Network (which lists advisers who specialize in younger clients), the Alliance of Comprehensive Planners, and the Certified Financial Planner Board of Standards.
Consider a “robot”
You might want to look into a hybrid of the going it alone and hiring an adviser. Services like Wealthfront and Betterment are known as “robo advisers,” and they’re getting more and more popular. They use software to accomplish some of the basics of low-cost retirement portfolio management.
This includes tax loss harvesting (selling securities that have gone down in price, to offset taxable capital gains earned elsewhere in the portfolio) and rebalancing (noticing when one category in your portfolio, such as international stocks, has changed in value, and automatically reallocating your money elsewhere to maintain your desired diversification). They charge a small fee to do this stuff automatically.
For a larger but still modest fee, services including Betterment and Personal Capital offer access to a financial adviser as well, usually over email and video chat. These are money managers, so they’re not pushing particular products.
Anya Kamenetz welcomes your questions at firstname.lastname@example.org.
© 2017 Anya Kamenetz Distributed by Tribune Content Agency, LLC.