The retirement-savings rule is on life support

You give your retirement money to a financial professional. You expect that person to act in your best interest — to charge reasonable fees, try to minimize taxes and make decisions that are going to get you the returns you deserve.

You expect this because it's their job. Surely they're going to advise you on the best investment decisions for you ... right?

I wish it were that simple, and I can't believe it isn't.

But today many financial professionals are not doing what's in the best interest of the investor. They recommend funds because they make money selling them. They charge confusing fees that the investor can't see. They push you into investments that are in their best interest — not yours.

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And the one thing that was going to help stop this from continuing to happen might not survive some tough legal battles ahead.

President Donald Trump on Feb. 3 signed a memorandum directing the Department of Labor to reconsider its fiduciary rule, which would require financial professionals who provide retirement advice to act in their clients' best interests. The rule was scheduled to go into effect on April 10.

In response to Trump's request, the DOL has reportedly filed for a 180-day delay and wants to have another round of public comments on the rule itself.

Whether or not this rule survives could directly impact individual investors. Many financial firms were in the process of making positive changes in response to the rule and even publicly supported it. Of course, that was back when they were going to be required by law to do what was best for their clients.

More from Portfolio Perspective:
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However, now that the Trump administration is threatening the rule's existence, it's likely that many financial institutions are going to stay silent, indicating that their former support was solely for public display.

To be fair, some financial firms say they will comply with a fiduciary standard no matter what happens to the regulation. That's the good news. However, silence from other institutions could be as bad as lack of public support. Because if your financial professional is not openly supporting the rule, then he or she may not be willing to fight for you. And once the rule is gone for good, it could mean reverting to business as usual.

It may be time for you to reconsider who you allow to manage your money. One thing is for sure: All investors need to ask that person to clarify their stance on the fiduciary rule. Because if the rule dies and that person is no longer required by law to act in your best interest, you should know whether they are committed to doing so anyway.

The state of the industry

The fiduciary rule's six-year history has coincided with a secular shift in the industry that has felt promising and good. We've seen positive evolutions, such as easier access to low-cost investments (e.g., exchange-traded funds) and heightened awareness of how financial providers are compensated.

But now that the rule has the potential to be thrown out, it's time to reexamine the conflicts of interest that are costing American workers and their families $17 billion a year — and that could persist without the proper regulations in place.

Brokers are not currently required to make investment recommendations based on your best interests, and instead only need to pick "suitable" investments. They are allowed to consider whether a particular recommendation will result in a higher commission or kickbacks to them.

As a result, you are likely to end up in a less-than-ideal portfolio — one that's higher-cost and lower-return than it should be.

There have been various arguments opposing the fiduciary rule. One came from Gary Cohn, the White House National Economic Council Director, who said that the rule would limit investors' right to choose their investments. He told The Wall Street Journal in an interview: "We think it is a bad rule. It is a bad rule for consumers. … This is like putting only healthy food on the menu, because unhealthy food tastes good but you still shouldn't eat it because you might die younger."

It's an interesting analogy, but it is flawed. The rule isn't about limiting choice (all the choices are still there); it's about empowering consumers with information to make better decisions and forcing advisors to give straightforward advice.

The right analogy would be both options are still on the table — you want to eat a cheeseburger instead of a salad, you can still do that — but you'll know exactly how many calories are in it and how much it'll cost you. In the case of financial services, if you want to put your money in a worse investment product, you can still do that — and the advisor has to disclose all the fees associated with it and can't tell you it's the best option for you (unless it truly is).

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The text of the rule itself is clear on this point; it simply requires advisors to make an investment recommendation that they can demonstrate is in an investor's best interest. That may be the lowest-cost option, but not necessarily. If advisors are not able to defend the investment products they are recommending, including their cost, investors will not suffer from their absence.

If you want a good analogy for what this rule could do for financial services, consider the medical industry. Doctors aren't allowed to get paid by drug companies for pushing drugs on you. That would be ridiculous, right?

Why should it be different in financial services? Why should so-called financial advisors be allowed to be compensated for pushing certain products on you? It seems ridiculous, right?

— By Jon Stein, founder and CEO of Betterment