6 KIPLINGER’S PERSONAL FINANCE^ 05/UP FRONTUP FRONTLISE METZGERFROM THE EDITOR
(^) Janet Bodnar
How to Get Good Advice
A
mid all the Sturm und Drang
surrounding the U.S. Depart-
ment of Labor’s proposed fidu-
ciary 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 brief ly, the rule requires
that brokers and other financial pro-
fessionals who offer investors advice
on retirement accounts—401(k)s,
IRAs and rollover IRAs—act as fidu-
ciaries, 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 im-
portant 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 page 38, 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 institu-
tional-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
(see page 50), or solid individual stocks
(see page 58) or low-cost exchange-
traded funds (see “Earn Up to 6%
From Our Fund Portfolios,” March).
Aside from their high fees, variable an-
nuities are complex investments that
should be approached with caution
under any circumstances (see “Income
Guarantees, With a Catch,” May 2016).
Pricing changes. Regardless of what
happens to the fiduciary rule, many
brokers and other financial-services
firms have already changed their
practices and pricing policies. There
has been a move away from sales com-
missions and toward managed ac-
counts, in which you pay a f lat fee—1%
per year is common—for the company
to handle your retirement assets. Mer-
rill Lynch has announced that it will
stop offering commission-based IRAs
and switch to fee-based accounts.
So you need to know which arrange-
ment suits you best. You may like the
convenience of an annual fee. But if
you are a buy-and-hold investor who
trades infrequently, or a do-it-your-
selfer who makes your own decisions
and just needs someone to execute
trades, it may prove less expensive to
pay trading commissions (especially
with commissions dropping; Fidelity
recently cut its fee to $4.95 for stock
and ETF trades).
If your account is too small to justify
a 1% fee, you may decide to get com-
puterized 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 f lat 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 comfort-
able with what you’re investing in.
Match your investments with your
appetite for risk. No matter what ulti-
mately happens with the fiduciary rule,
ask if potential advisers follow a fidu-
ciary standard, how they are compen-
sated and how they resolve potential
conf licts. If you don’t get satisfactory
answers, take your business else-
where. In the end, nobody has a bigger
stake in your money than you do. ■
janet bodnar, editor
follow janet’s updates at http://www.twitter
.com/janetbodnar.
Protect yourself
by being your
own fiduciary.