Column: Legislation necessary to protect retirement funds
Retirement planning can be overly complicated, which is why many consumers turn to financial advisors for advice. Unfortunately, many consumers don't realize the advisors they see are not legally required to serve their best interests.
Because of our failure to require financial advisors to put their client's needs first, these so-called "advisors" can disguise sales pitches as advice and enrich themselves at their client's expense,
The Obama Administration's Department of Labor Conflict of Interest (Fiduciary) rule would have changed this deficiency in the law, requiring all financial professionals who provide retirement investment advice to serve their client's interests rather than their own. This is a common-sense idea that would provide desperately-needed protections to investors from all walks of life.
Unfortunately, the Trump administration has made it clear it intends to roll back these new protections. As someone who has ample experience in this business, I cannot emphasize enough what a huge mistake this is.
Without this rule, financial advisors would be allowed to continue dispensing advice without disclosing and minimizing conflicts of interest. Allowing this to happen comes with real costs to investors that can amount to tens or even hundreds of thousands of dollars in lost savings over time.
Financial advisors aren't bad people, but they do have to overcome a payment system rife with flawed incentives. I've watched firsthand as other financial advisors steered clients into inferior products that come with high fees and a questionable history of performance. They do this because, many times, inferior investment products come with higher commissions.
Further, firms are notorious for setting quotas and sales contests for selling certain products, regardless of whether those products best serve their clients. A lot of times, the contest winner will earn a large bonus or a trip to a far-flung beach destination in the Caribbean.
Under the new fiduciary rule, however, these harmful incentives would be eliminated and financial advisors wouldn't have to face these decisions.
Of course, the lobbyists of giant investment and insurance firms aren't concerned with the little guy or how much he or she is paying in fees. As expected, they are fighting tooth and nail to kill the rule so they can preserve their ability to recommend products that make them the most money. Unfortunately, the Trump Administration has sided with those lobbyists — which is why I'm writing this letter.
Consumers diligent and responsible enough to save for retirement deserve better treatment. Not only that, but they shouldn't have to wonder if the financial advisor they hired is abusing their trust.
Sens. Heidi Heitkamp and John Hoeven have an opportunity to show where they stand on this critical issue. They can choose to stand with hardworking North Dakotans who are saving for a secure and independent retirement, or they can stand with President Trump and his Wall Street friends.
The choice is theirs, but rest assured we're all watching.
Brandt is an investment advisor representative with Capital City Wealth Management in Bismarck.