Fiduciary rule fight likely to go on despite court ruling

The next time you visit your financial adviser, it’s important to ask if they’re managing your retirement money with your “best interests” at heart, rather than their own.

Indeed, the burden of looking out for how your money is invested and what fees and commissions you pay an adviser or broker appears to be shifting back to you.

This buyer-beware atmosphere follows a federal court ruling late Thursday that struck down a rule created in 2016 by the Obama administration. That consumer-protection rule required financial pros to act as “fiduciaries,” meaning they must look out for your financial well-being, just as a doctor would your health or a lawyer your legal affairs.

The Labor Department’s so-called “fiduciary rule” — also dubbed the “conflict-of-interest rule” — forced financial professionals to put their clients’ financial interests ahead of their own. In layman’s terms, the retirement funds and products an adviser steers you toward must not only be “suitable” for your needs but also low-cost — rather than mainly for the purpose of generating a higher commission or fees for the adviser.

But Thursday’s ruling by the U.S. Court of Appeals for the Fifth Circuit clouds the future of the fiduciary rule. It’s possible the Labor Department could ask the court to revisit its decision or ask the Supreme Court to hear the case, says Andrea Coombes, investing and retirement specialist at NerdWallet.com, an online personal finance site.

“The ruling is bad for investors because it means investors will get conflicted advice,” says Heidi Shierholz, senior economist at the Economic Policy Institute, a non-partisan, nonprofit think tank. “It means that retirement investors are at risk of having their advisers legally steer them into investments that are not good for them.” Without the “fiduciary rule” in place, she adds, it means “the law does not protect them, so they will have to protect themselves.”

Opponents of the rule argue that it was overly burdensome and, as a result, that it would end up resulting in higher, not lower, costs for investment advice.