Start the conversation
It's June 9, and that means the Department of Labor's new fiduciary rule is now in effect.
The goal of the legislation is to improve the quality of advice you receive as an investor when it comes to your retirement, but I believe the opposite will happen.
The fiduciary rule is, in fact, a huge risk to your retirement.
Here's why, and more importantly, how you can protect your money (and profit) despite the government's ham-fisted approach.
A Wolf in Sheep's Clothing
The new rule is supposed to improve the quality of information you receive from anyone providing advice on a retirement by forcing them to put your interests ahead of theirs.
Sounds good in theory, right?
Sadly, I've never seen a government regulation that didn't have unexpected consequences.
Especially when it comes to your money.
The thinking is that the new rule will force advisors to take proactive steps that reduce the conflicts of interest inherent in every recommendation they make – not the least of which is receiving a commission for selling you something. Prior to this rule, all they had to do was disclose.
Wall Street would have you believe this is a very sophisticated process, but in reality they may as well be selling used cars. To their way of thinking, you're the one at risk if the "transmission" fails or an investment blows up. After all, they "told" you about the risks.
Here's Where It Gets Ugly
The new rule will…
- Lead firms to charge higher fees as a means of making up for the reduced commissions associated with each recommendation. So you'll pay more for less, which is a lot like the insurance racket in this country with each new enrollment period, or those "temporary" airline fees that now top $41 billion a year (and which are permanent).
- Force less affluent retirees out of the system because they cannot afford desperately needed advice that will become fee-based as opposed to commission-based. I'm already hearing plenty of back-channel reports involving brokerage firms "firing" smaller accounts because they just don't want the hassle (or the liability).
- Make investors less profitable by permanently altering the diversification process. It's great that the new rule makes it easier for investors to sue based on bad advice. The downside is that advisors realize this and will adjust their recommendations based on reducing the probability of being sued rather than achieving the highest returns for you. That means more bonds recommended and fewer stocks in the mix. Never mind the irony that bond markets are the riskiest they've been in a generation!
- Limit the number of investments available to you. Regulators have rightly focused their ire on high-fee, poor return variable annuities and non-traded trusts that have been the bane of investors and unscrupulous advisors for years, but I think this is going to spread rapidly to include anything related to pre-IPO allocations, certain kinds of master limited partnerships, perfectly legal tax shelters, certain high-growth small-cap stocks, and more. Specialty investments focused on emerging markets will probably go away, too. Finally, any mutual fund charging 12b-1 fees is at risk, including many extremely popular, widely held ones that may simply disappear from many screeners and brokerage firms.
- Make your analysis tougher. Right now any investor can log on to his or her favorite online investing portal and take advantage of very sophisticated tools that complement the services I offer and the recommendations I make. Unfortunately, many of 'em will go away or get restricted to high-value clients as brokerage firms and their advisors protect themselves under the guise of protecting you.
To be clear, I'm all for protecting the consumer, which is ostensibly what the new rule is all about. I like the concept of making Wall Street accountable. But I'm not interested in doing so in a way that sees your profitability impacted and your success limited.
Thankfully, my team and I saw this coming a long time ago.
So, we did something about it that's worked out very well for every subscriber who's come on board over at our sister service, the Money Map Report.
Here's Where It Gets Profitable
We spent hundreds of hours combing through the financial back pages, through literally thousands of securities, and hand-picked a group of ten investments called "26(f) programs" – a moniker selected because it refers to the DOL code dating all the way back to the Great Depression era. Learn more here.
Many of you already know what these are (and hopefully have them in your portfolio, considering they're all profitable if you're following along as directed).
If not, there's still time for you to act – but barely.
Firms have until January 2018 to be in full compliance, which means they haven't gotten around to making your life hell and reducing your financial profitability dramatically… yet.
That means you can still pick up funds like those I'm recommending in the special "26(f)" report and have them "grandfathered" in when the full monty hits.
All of the opportunities, by the way, are still great choices and still very viable investments with the potential to help you build serious Total Wealth. I'm talking about adding $2,000… $5,000… even more to your income each month for the rest of your life, and I don't want you to miss out. Click here to get the full briefing on these incredible wealth-building opportunities.
Speaking of which, we're already deep into creating the webinar I promised as part of this week's "Dow 60K" article, and I can't wait to share it with you in the weeks ahead.
What you'll learn is a "game-changer" in the truest sense of the word.
About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.