Financial Planning

How to Get Good Investment Advice

Protect yourself by being your own fiduciary.

Amid all the Sturm und Drang surrounding the U.S. Department of Labor’s proposed fiduciary rule—and President Trump’s order to review it—I’m concerned that some of the practical implications for investors have been overlooked. So this month we’re going to bring them into focus.

To review briefly, the rule requires that brokers and other financial professionals who offer investors advice on retirement accounts--401(k)s, IRAs and rollover IRAs--act as fiduciaries, putting clients’ best interests ahead of their own financial gain. Specifically, the rule would target high-fee investments in rollover IRAs, such as variable annuities. I think that goal, though laudable, raises two important questions: Should you roll over retirement funds into an IRA when you leave your job or retire (a strategy that Kiplinger’s often recommends)? And if so, where should you invest the money?

In her story on rollovers, senior associate editor Sandra Block points out that rollovers make sense if your 401(k) has high fees, or if you want to gain access to more investment options or have more control over your account. But sometimes you should just stay put—especially if you like your plan’s investment choices and have access to lower-cost institutional-class mutual funds not available to retail customers.

As to where you should put your money if you do choose a rollover, you won’t go wrong following our advice to stick with top-performing mutual funds such as those in the Kiplinger 25, or solid individual stocks or low-cost exchange-traded funds (see Earn Up to 6% From Our Fund Portfolios). Aside from their high fees, variable annuities are complex investments that should be approached with caution under any circumstances (see Income Guarantees, With a Catch).

If your account is too small to justify a 1% fee, you may decide to get computerized recommendations from an online robo adviser. Or if you’re in the market for a particular service, such as retirement planning, you might look for an adviser who charges an hourly rate or a flat fee per project (check out the Garrett Planning Network).

It’s also important to remember what the fiduciary standard doesn’t do: It doesn’t guarantee that you’ll get better advice or that you won’t lose money. The best way to protect yourself is to be your own fiduciary: Feel comfortable with what you’re investing in. Match your investments with your appetite for risk. No matter what ultimately happens with the fiduciary rule, ask if potential advisers follow a fiduciary standard, how they are compensated and how they resolve potential conflicts. If you don’t get satisfactory answers, take your business elsewhere. In the end, nobody has a bigger stake in your money than you do.

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