But not if President Trump and his deregulation army have their way. They want to delay - and ultimately kill - the new rules.
I've written a lot recently about Trump's deregulation agenda. And as you know, I'm a big proponent of targeted deregulation efforts that remove regulatory burdens while also leaving behind smart, effective rules that protect the American people.
When it comes to deregulation, it makes sense to cut endless pages of superfluous prose.
But throwing the baby out with the bathwater is worse than having a dirty monster child.
And the Labor Department's pending "fiduciary" rules governing retirement accounts are a perfect example of a well-intentioned regulation in need of some pruning.
If you are looking to understand these new rules in simple terms - as well as the impending fight over whether or not they'll actually be implemented - you've come to the right place.
The Suitability Standard vs. the Fiduciary Standard
The Labor Department found its way into the mix by virtue of the 1974 ERISA laws, which give the DOL authority to regulate retirement accounts. Old ERISA regulations were never revised to reflect changes in retirement savings trends - most importantly, the shift from defined benefit plans to defined contribution plans, and the huge growth in IRAs.
Urgent: An $80 billion cover-up? Feds use obscure loophole to threaten retirees… Read more…
The DOL proposed reforms in 2010, but withdrew them in 2011 after being attacked by the financial industry regarding regulatory costs, liability costs, and client concerns.
On Feb. 23, 2015, President Obama declared, "Today, I'm calling on the Department of Labor to update the rules and requirements that retirement advisers put the best interests of their clients above their own financial interests. It's a very simple principle: You want to give financial advice, you've got to put your client's interests first."
The DOL's fast-tracked rules were issued on April 6, 2016, and became known as the fiduciary standard.
Registered investment advisors (RIAs) are registered with and regulated by the Securities and Exchange Commission (SEC), a state securities regulator, or both. They mostly work for fees, as opposed to working on commission. RIAs operate on a "fiduciary" standard of care with their clients. That simply means their investment recommendations must be in the best interest of the client and the client's interests must come first.
Brokers, on the other hand, are overseen by the SEC and the Financial Industry Regulatory Authority (FINRA), a self-regulatory organization for broker/dealers. Brokers operate on a "suitability" standard, which means their recommendations must be suitable for the customer.
But just because an investment is suitable doesn't mean it's in the customer's best interest - in fact, there's a monumental differe…
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.