The Reuters News service headline was depressing: “From Wall Street to Wisconsin, brokers cheer Trump’s order.” The order that gave these financial advisers so much joy was President Donald Trump’s charge to the Labor Department to see if the so-called fiduciary rule should be modified or dropped.

That rule was devised over six years of negotiations and it’s slated to go into effect in April. In essence, the Department of Labor rule says brokers and advisers who manage retirement accounts like 401(k)s must follow the fiduciary standard. That means the financial adviser is required to put the client’s interest first with retirement savings, eliminate conflicts of interest and promote transparency. Think about that for a moment. Isn’t this how a financial adviser should act?

Large segments of the financial services industry don’t like the rule. For instance, Gary Cohn is a former Goldman Sachs executive and current head of the White House National Economic Council. He told the Wall Street Journal he thought imposing the fiduciary standard was “a bad rule.” He went on to say: “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.” Seriously?

Personally, I think the shortfall in the fiduciary rule was that its scope is too narrow. The demands of dealing with customers as a fiduciary should apply to all investment accounts, including retirement accounts and nonretirement accounts, big accounts and small accounts.

That said, there is good news. A Texas judge recently dismissed a major lawsuit filed by the U.S. Chamber of Commerce and other opponents to the fiduciary rule with respect to retirement accounts. The judge upheld the Department of Labor’s motion for summary judgment.

No one really knows what the Trump administration will do after its review. I still think the rule change will be upheld because in the end both common sense and sound public policy point toward requiring financial advisers to put their clients’ interests first and eliminate conflicts of interest with retirement savings.

In the meantime, if you have a financial adviser or are thinking about hiring a financial adviser, ask if they adhere to the fiduciary standard. If they don’t, go elsewhere. Being a fiduciary is a baseline requirement for any financial adviser. If they say yes, you still need to understand how they’re paid, learn about their fees and see if their financial approach meets your needs.

 

Chris Farrell is senior economics contributor, “Marketplace,” commentator, Minnesota Public Radio.