What to You Need to Know About Advisors Repapering Your Account

Note: This article is courtesy of Iris.xyz

By Brad Sherman

The White House’s report on conflicting financial advice estimates that there is a staggering $1.7 trillion invested in products that generate conflicts of interest for advisors—meaning products that advisors earn a commission for selling to clients—leading to a loss of 12% in a retirement account’s value over 30 years.

To combat this, the Department of Labor is enacting a new rule requiring advisors to be held to a fiduciary standard, meaning they need to always act in your (the client’s) best interest.

If an advisor still desires to sell conflicted products, they will be required to have you sign a Best Interest Contract Exemption (BICE). This contract also gives you the right to partake in a class-action suit against your advisor if the conflicted product is not ultimately in your best interest.

What to Ask Before the Switch

If you employ a traditional financial advisor who was not previously bound to a fiduciary standard, there is a very good chance your money is part of the $1.7 trillion losing returns because of conflicted advice. And when your advisor comes to you to “repaper”, i.e. have you sign a BICE or any other paperwork related to their switch to a fiduciary, you should find out how much your advisor was making from commissions on products that may not have been in your best interest.

Traditional advisors are worried about you saying, “hold on a second” when they begin compliance with the fiduciary rule. Paul Rielly, CEO of traditional financial advisory company Raymond James, said that Raymond James is delaying taking on new advisors until it can determine how much the advisors’ accounts would need to be repapered. During the campaign against the DoL rule, Rielly encouraged Raymond James employees to go on record opposing the fiduciary standard. Additionally, if an advisor is planning to transition, many are scrambling to do so before November 11th, after which FINRA will notify all of their clients of the transition and encourage clients to ask what it means for them financially.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.