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Here's why your retirement savings accounts will never be the same

A seismic shift is in the cards for your 401(k) and IRA savings now that a rule that requires financial advisors to work in your best interest is in effect.

A seismic shift is in the cards for your 401(k) and IRA savings now that a rule that requires financial advisors to work in your best interest is ineffect.

The Labor Department had delayed the regulation's original April 10 start date by 60 days after President Donald Trump issued a presidential memorandum in February calling on the agency to review the rule and deliver an updated economic and legal analysis.

"It's important to ask how your advisor is getting compensated," said Farnoosh Torabi, author of "When She Makes More" and host of the podcast "So Money."

"We shouldn't assume that the rule will be implemented overnight," she said. "We still have to do our own due diligence."

Bear in mind that the Labor Department's regulation, which went into effect Friday, applies only to retirement accounts, but not taxable brokerage accounts.

Here's what you can expect now that the investor protection rule is here.

Mitigating conflicts

Your financial advisor and his firm will now have to comply with the "impartial conduct standard."

This means your advisor must charge you no more than reasonable compensation, avoid misleading statements and offer advice that is in the investor's best interest.

A slate of additional requirements will take effect on Jan. 1, including written disclosures that financial services firms and advisors must make to their clients.

Some $7.85 trillion in IRA assets is at the heart of the new investor protection rule, as these accounts are very profitable for firms because people roll their savings out of 401(k) plans when they retire or change jobs.

In reaction to the fiduciary rule, as it's also known, more financial advisors who earned commissions from the sale of investments and other products may switch to a "fee only" structure — charging clients based on the amount of assets they manage for them or on an hourly or monthly subscription basis, Torabi said.

Nevertheless, you should protect your retirement savings by asking your advisor about his or her fiduciary duty to you and how he or she makes money.

Financial self-defense

The first question to ask your advisor is whether he or she is a fiduciary. The best way to get a response is to do it in writing; this fiduciary oath is a starting point.

"Don't assume he or she is a fiduciary," said Torabi. "Ask them that first."

You should also ask your advisor how will you be invested and how much it will cost.

"Will they put you in a mixture of index funds, or will it be more actively managed?" said Torabi.

Consider that the average expense ratio of an index equity mutual fund was 9 basis points in 2016, compared with 82 basis points for an actively managed stock fund, according to the Investment Company Institute.

You should also know how your advisor is paid: Does his/her combination include commissions from the sale of insurance, annuities and mutual funds? Are you paying a fee that's based on assets they manage for you?

"Don't assume he or she is a fiduciary. Ask them that first." -Farnoosh Torabi, author of "When She Makes More"

Under the Obama administration, the White House Council of Economic Advisers said conflicts of interest by investment advisors led to $17 billion in lost income every year for most savers.

Advisors who assess a fee based on assets managed tend to charge you about 1 percent. Others, however, charge a retainer fee or they bill their clients by the hour or through a monthly subscription.

"The good news is that the marketplace is vast and the advisors doing well in the market are the ones who recognize that investors want options," said Torabi.

Finally, be discerning about the professional you select to oversee your life's savings.

Your advisor should offer you more than just promises of outsized returns and his firm's prestige, said Torabi.

"For my husband and me, the advisor we selected was interested in what we wanted, what our goals are and how we like to communicate," she said. "Make sure they ask you a lot of questions instead of doing all the talking."

"On the Money" airs on CNBC Saturday at 5:30 a.m. ET, or check listings for air times in local markets.