When switching jobs or preparing to retire, you have the option of rolling your 401(k) plan into an individual retirement account. This can get complicated, so many people seek the advice of a financial expert.
However, not every financial professional offering advice on that subject is required to act entirely in your best interest. While investment advisors are required to follow a principle known as the fiduciary standard, brokers are only required to recommend "suitable" investments.
So, then, shouldn't your fees be charged accordingly?
Over strong objections from Wall Street observers and a variety of financial regulators, the White House announced Monday that it plans to move ahead with a new rule that will hold investment brokers to that higher fiduciary standard, requiring by law that they act in the best interests of their investor clients.
The so-called fiduciary duty rule would prevent certain brokers from considering their own profits when they steer clients into particular investments, likely cutting into the fees those brokers receive when they advise clients on 401(k) plans and other retirement accounts. White House officials said on a conference call with reporters that in the coming months, the Labor Department will release a proposed rule that lays out the full details of the plan.
Under pension law, a pension plan's trustees and administrators are considered fiduciaries—that is, they are bound to act in retirees' and future retirees' best interests. The same rules do not apply to the brokers who advise people on 401(k) plans.
In this video, CNBC Senior Personal Finance correspondent Sharon Epperson discusses how financial advisors get paid—and the difference between fiduciary and suitability standards—with three members of the CNBC Digital Financial Advisor Council: Zaneilia Harris, president of Harris and Harris Wealth; Grant Rawdin, founder and CEO of Wescott; and Manisha Thakor, director of wealth strategies for women at Buckingham and The BAM Alliance.