The fiduciary rule is now in effect: What you need to know

Is your financial advisor working in your best interest? You’d think the answer would be “yes”, right? In reality, it’s more like “maybe” because some of the retirement advice you’ve been getting might just be suitable for you while also making your advisor richer, too.

But all that changes now as the much-anticipated fiduciary duty rule finally goes into effect on Friday. Under this new regulation issued by the Department of Labor, it raises the bar on the level of advice you’ll be getting for your retirement investments.

The rule requires financial professions of all types, including brokers, financial advisors or wealth managers, to act as a fiduciary, meaning they must act in the best interest of their clients. Before this rule went into effect, an advisor may have recommended financial products that are pretty good for you, but might have come with higher fees or commissions that benefit them. In a 2015 White House report under the Obama administration, the Council of Economic Advisors estimated that this conflict of interest costs investors $17 billion every year.

Now with the fiduciary standard in place, brokers have to be more upfront, transparent regarding fees and commissions, and recommend retirement products in their client’s best interests.

For the financial services industry, it could cost them billions in lost commissions and added compliance costs. So it’s no surprise that some firms have been against the rule, even though many have been preparing for some of the changes it will bring.

In fact, the fiduciary rule was supposed to go into effect in April, but President Trump backed the directive to delay the rule and review it again. The administration said it will reduce Americans’ access to certain retirement offerings, information and advice.

But after careful consideration, Labor Secretary Alexander Acosta confirmed that the rule would be phased in beginning June 9.

“Regardless of what happens with the rule, it doesn’t mean consumers can relax and stop advocating for themselves,” says Julie Ford, certified financial planner at Ford Financial Solutions. It’s important to know if your advisor is commission-based, fee-based, or a combination of both.

Some of the most important things to ask an advisor are whether they are acting as a fiduciary while advising you on your retirement accounts, and what exactly you’re paying for, with a fee breakdown. For example, advisors who work on commission are now required to provide their clients with a disclosure agreement called a Best Interest Contract Exemption.

If you get a response that’s defensive or unprofessional in any way, take your money and move on.

Jeanie is a reporter at Yahoo Finance. Reach out by email jeaniea@yahoo-inc.com; follow her on Twitter @jeanie531.

WATCH MORE:

Now I Get It: 5 car insurance myths that are costing you

HGTV stars share 7 tips to renovate your home on the cheap

Here’s why women need to take control of their money right now