On Thursday, June 21, 2018, the U.S. Fifth Circuit Court of Appeals confirmed that its decision to vacate the Department of Labor's (DOL) “fiduciary rule," which required advisors who offer investment advice on retirement savings accounts to put their clients' interests before their own, is final.

What Was the Fiduciary Rule?

The fiduciary rule provided enhanced protections to investors by imposing greater accountability standards on financial advisors.

It expanded the definition of a fiduciary to include anyone who receives compensation for providing investment advice for tax-advantaged retirement accounts. Advisors who operate under the fiduciary standard must avoid conflicts of interest and are prohibited from making trades for a client for the sole purpose of obtaining a higher commission. They must charge reasonable fees and refrain from making misleading statements. The rule's provisions did not, however, extend to non-retirement plan accounts.

Originally, the rule was set to take effect on April 10, 2017, but in February of that year, President Trump ordered the DOL to examine whether the rule would “adversely affect the ability of Americans to gain access to retirement information and financial advice."

"The rule was meant to reassure customers that their advisors were acting in their best interest when helping them make decisions about their IRAs, 401(k)s or retirement plan rollovers," says Kathleen Stewart, Senior Director and Family Wealth Strategist at BNY Mellon Wealth Management. "People want to work with someone that they trust, and they generally expect their financial advisor to be working in their best interest. When they discover that's not the case, it can be eye opening."

Now What?

Now that the rule has been vacated, investors will need to be vigilant about determining whether their advisor is acting as a fiduciary — that is, working in their best interest.

At BNY Mellon Wealth Management, we have always operated under the fiduciary standard. We are not compensated on the products we sell, but on our expertise and ability to serve our clients well. Our priority is to meet the needs of our clients and offer the best investment guidance to help them reach their financial goals.

For more information on what the fiduciary standard is, how it differs from the less stringent “suitability" standard that many advisors follow and how you can determine whether your advisor is truly putting your interests first, read our article, “Work With a Fiduciary to Ensure You're Getting the Best Advice."

  • This material is provided for illustrative/educational purposes only. This material is not intended to constitute legal, tax, investment or financial advice. Effort has been made to ensure that the material presented herein is accurate at the time of publication. However, this material is not intended to be a full and exhaustive explanation of the law in any area or of all of the tax, investment or financial options available. The information discussed herein may not be applicable to or appropriate for every investor and should be used only after consultation with professionals who have reviewed your specific situation. BNY Mellon Wealth Management conducts business through various operating subsidiaries of The Bank of New York Mellon Corporation. ©2018 The Bank of New York Mellon Corporation. All rights reserved.