New DOL Rule Requires Financial Advisers to Act in Client’s Best Interest
Many Fidelity 401k Plans may be in Violation of New DOL Fiduciary Rule
According to a report, Fidelity, the largest 401k provider in the country, will now act as a plan level investment fiduciary to certain 401k plans. However, many advisors feel as though Fidelity has an inherent conflict of interest in acting in this capacity which may expose plan sponsors to a violation of the new DOL Fiduciary rule. The new DOL regulation aims to reduce/eliminate conflicts of interest in providing investment advice to retirement investors.
Here is where the potential problem lies. Fidelity offers an “open architecture” 401k platform, which allows Fidelity funds and non-Fidelity funds to be utilized as plan investments. With Fidelity offering hundreds of their own proprietary mutual fund products, logic suggests it will be difficult for Fidelity to be unbiased when determining whether a Fidelity or non-Fidelity fund is in the plan’s best interest. Many advisors think this is a poor business practice for Fidelity to roll out, as it may confuse plan sponsors into thinking that they are exposed to less risk than they are, and potentially result in Fidelity not serving their clients best interest. At the very least, Fidelity may have just created an appearance of a conflict of interest, which could be problematic.
The fiduciary investment advice which Fidelity will provide will only occur at a “point in time” (at plan set-up) and they will NOT be providing on-going monitoring of plan investments, which will be a duty left to plan sponsors.
Strategy: Considering downsizing your home to boost your retirement income?
(Source) – It’s a seller’s market in much of the country. Real estate is a hot commodity, with properties in some areas being snatched up virtually as soon as they are listed.
That’s good news for sellers who can command a higher price for their homes. At closing, they may find themselves with extra money in their pocket. But finance experts say not to be too hasty in spending that cash.
Like any windfall, there is no one right way to spend the proceeds of a house sale. “It boils down to your priorities for the intended money,” says Keith Bernhardt, vice president of retirement and college products for Fidelity. To maximize it, you need to consider a couple of factors, including the taxes you might have to pay….A bank account can be a poor place to keep money that isn’t going to be needed for a while. “It will lose value over time,” says Bernhardt. The minimal interest offered by savings accounts lags far behind the rate of inflation.
Even if you have enough from a home sale to purchase a new house with cash, Steven Azoury, [a chartered financial counselor from Michigan,] suggests only paying what’s needed for the down payment. The interest rates for mortgages are still low enough that it might make more sense to finance a house sale and invest the rest. You can read this entire article by clicking here.
Our take – Downsizing your home and using the profits to supplement your retirement income is a popular strategy among retirees. However, it is crucial that you plan it out accordingly and make the right investment with your profits. Don’t go it alone – we can help! Contact us at [email protected] to connect with one of our financial advisors.
Study: Many People are Significantly Behind in Saving for Retirement
(Source) – While many Americans know if they’re putting money aside for retirement, few can tell with confidence how much money they should accumulate to maintain their lifestyle after they stop working. Over 80% of Americans say they don’t know how much money they’ll need for retirement, according to the final report from a four-year-long study of 50,000 people aged 25 and older, and released recently by Merrill Lynch with aging consultants Age Wave. Retirement costs 2.5 times the cost of the average American home, it found.
The median amount of saving for households age 65 to 74 was $148,000, less than three times the median U.S. salary of $55,775, according to 2015 Government Accountability Office report, and far below the required amount that would ensure a comfortable lifestyle. People should have 10 times their current salary by the time they’re 67, according to Fidelity Investments. Click here for the full article.
Our take: How much should you save for retirement? This is one of the most frequently asked questions that we receive, and the answer is entirely dependent on your particular situation. It all depends on your goals, determining what your needs will be in retirement, and your investment risk tolerance. Getting organized and assisting individuals map out their road to retirement is a frequent task that we engage in with our client’s. Contact us at [email protected] to help plan your retirement.
Study: Individuals Working With a Financial Planner Add 29% to Their Retirement Income
(Source) – Research by David Blanchett and Paul Kaplan of Morningstar, Alpha, Beta, and Now . . . Gamma, has attempted to quantify into real numbers the value that financial planners can provide. Their research shows that financial planners help individuals generate roughly 1.82% excess return each year, creating roughly 29% higher retirement income wealth. This means even if an adviser is charging a 1% fee a year for the management of retirement assets, the financial advice still has a huge impact on generating additional retirement income. Click here for the entire article.
Our take: This research showcases the tremendous value that a financial planner can bring to an individual’s retirement. According to this study, if an individual is on track to earn $50,000 per year in retirement, they may be able to increase this amount to $64,500 per year by working with a financial planner throughout their career. Find out how we can help you with your retirement, by contacting us at [email protected].
IMPORTANT DISCLOSURE: Results may vary. Lighthouse Capital, LLC did not participate in this research study performed by Morningstar, Inc..
New DOL Rule Requires Financial Advisers to Act in Client’s Best Interest
(Source) – The Secretary of Labor reaffirmed that the fiduciary rule will begin to phase in on June 9. The new definitions of who is a fiduciary will go into effect along with the impartial conduct standards on June 9–60 days later than originally planned….This means that on June 9, IRA advisors and others will be expected to provide advice that is in retirement investors’ best interests, charge no more than reasonable compensation, and avoid misleading statements. Click here for the full article.
Our take – Ever since Lighthouse Capital opened in 2012, we have utilized a business model that puts our financial advisers in a position to work in our client’s best interest. To be candid, we find it to be a black eye on our industry that there are many adviser’s currently operating without their client’s best interest in mind. If you are concerned that your financial adviser may not be working in your best interest, contact us at [email protected].