Montanans should be able to trust financial advisers

“First do no harm” — that is the physician’s creed. It is their guiding principle that means whatever the advice or procedure, the patient’s well-being is their primary consideration.

Shouldn’t that same guiding principle apply to your financial professional?  Shouldn’t your financial well-being be their primary consideration? Shouldn’t they have a “fiduciary duty” to you and your family?  After all you’re entrusting them with your hard-earned dollars.

"Fiduciary duty" may not be a familiar term to many Montanans — but it should be. It's a fancy way of saying that the highest standard of responsibility should apply to the financial professionals who offer you investment advice. It demands that they put your interests ahead of their own.

Current rules are woefully out-of-date.

Most Montanans might assume that such a high standard would already apply to all financial professionals who give investment advice. Yet, unfortunately, that is not the case.

Rather, the rules that currently govern the conduct of stockbrokers are woefully out-of-date — written over 40 years ago when IRAs were “brand new” and 401(k)s didn't even exist. Under the Employee Retirement Income Security Act of 1975 and other securities laws, registered "investment advisers" are subject to strict "fiduciary duty" standards, while brokers are not.

Under current law, a "retirement advice loophole" in the ERISA rules allows financial professionals including Wall Street banks, brokers and insurance agents — to operate under a lower standard. That standard says that they must recommend investments that are merely “suitable” — a much lower standard than the “fiduciary duty” discussed above. Simply stated, the “suitability standard” allows these financial professionals to put their own interests ahead of yours. The result? Americans end up in riskier investments with higher fees and lower returns — and Wall Street brokers make billions.

Research has shown that inappropriate financial advice is costing ordinary investors more than $17 billion a year nationwide.

Of course, the majority of these financial professionals do what is right, regardless. Unfortunately, however, others, use the loophole to take advantage of hard-working Montanans by recommending investments with higher costs, unnecessary risks, and/or lower returns in order to make higher commissions and fees for themselves.

This is not your father’s retirement plan.

The way Americans save for retirement has changed drastically over the past few decades. Thirty years ago, the typical worker had a pension through his or her job. Today, if workers have a retirement plan at all, it is likely a 401(k) or IRA.

Why does this matter? Because now more than ever, individuals must make the complicated decisions about financial security in retirement: what to invest in, how much, how to adjust their investments during their lifetime, and how to ensure their income lasts through their retirement years.

Many people understandably turn to a professional for help navigating the sea of retirement savings options available. However, what many don’t know is that financial professionals are not always obligated to act with your best interests in mind.

Today, we have our best chance in years to take a major step toward closing the "retirement advice loophole." Earlier this year, the U.S. Department of Labor issued a proposed "conflict of interest" rule which would hold financial professionals, who give investment advice, to the "fiduciary duty" standard which requires that they put the interest of their clients first.

But the fight isn't over. The release of the proposed rule simply opened a 75-day public comment period.  We are now nearing the close of that comment period, and there is still time to weigh in. The proposed rule is strongly opposed by Wall Street and much of the financial services industry.

You can help to close this loophole by filing a comment in support of the Department of Labor's proposed "conflict of interest" rule. It's easy. Just go to the AARP website http://www.aarp.org/loophole.  Please do it today.

You should be able to trust your financial adviser to put your interests first. It's time to close this loophole and ensure the highest standard for anyone who gives financial advice. This will help make sure that Montanans choose the best investments for themselves, their family, and their future. 

Montanans have worked hard for their money. They deserve the best advice from their financial professional.

(Joy Bruck of Helena is AARP Montana state president and in that role, leads the Executive Council which provides strategic direction for the association at the state level. Its membership is made up entirely of volunteers. )