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What You May Not Know About Your Financial Adviser

AARP estimates that bad investment advice robs Americans of as much as $17 billion each year. Credit: Ridofranz/iStockPhoto.com
AARP estimates that bad investment advice robs Americans of as much as $17 billion each year. Credit: Ridofranz/iStockPhoto.com
August 24, 2015

MADISON, Wis. – When a financial adviser gives you advice about where your money should be is that person telling you which investments will get him or her the highest commission, or which investments will actually be the best for your purposes?

That question has led the U.S. Department of Labor to propose a rule that would require the adviser to recommend what's best for the client.

Nancy LeaMond, national executive vice-president of AARP, says bad investment advice is a huge problem.

"Last year alone the hidden fees, the unfair risk and possible bad investment advice robbed Americans of as much as $17 billion,” she points out. “That's according to a recent study, and it's awfully hard to know how much is unreported."

LeaMond acknowledges that many retirement plans involve a multitude of complex decisions, and many financial advisers give great advice.

But she says too many are allowed to make recommendations that are really not in the client's best interest.

Financial planners who have earned certification as a CFP from the Institute of Financial Planning have pledged to put their client's interests first.

AARP supports the newly proposed regulations, which LeaMond says would serve clients' best interest by keeping fees and costs low, to protect retirement nest eggs.

"The Department of Labor issued proposed regulations this past April that will protect people against conflicts of interest and also require that anyone who gives financial advice only recommends investments that are in their client's best interest," LeaMond states.

Previously, employers managed pension investments for their employees, but today, most workers and retirees have to manage their own money.

LeaMond says that's why it's important that before you start a relationship with a financial adviser, banker, broker or fund manager that you ask that person point blank about what kind of recommendations he or she will make for you.

"Absolutely, it's very important to find out if that adviser is covered under the conflict of interest rule,” she emphasizes. “Now our hope is that down the road, anybody who gives financial advice will be acting in people's best interests."

Tim Morrissey, Public News Service - WI