Self-Directed Retirement and the Department of Labor Fiduciary Rule

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In 2016, the Department of Labor (DOL) drafted a new Fiduciary Rule designed to protect the interests of consumers. Specifically, it addresses investment transactions made by account holders on behalf of their IRAs, 401(k)s, and other retirement or tax-advantaged savings vehicles. The rule expands on the DOL definition of “fiduciary” to include any individual or entity that provides financial advice or direction toward a particular financial endeavor. Such fiduciaries must have a reasonable belief that products or services they recommend will yield positive results for their customers. This will put the best interests of retirement investors at the forefront of business transactions and ideally reduce the likelihood of scams or total losses.

Opponents have cited murky language as grounds for terminating or further delaying the implementation of the rule. They have claimed that adhering to these new standards will force the elimination of certain offerings, as providers may now be faced with new liabilities and uncertainty as to whether or not their existing business practices will be subject to additional government scrutiny. Therefore, the overall marketplace for investments may shrink. In accordance with these concerns, President Trump submitted a Presidential Memorandum calling for further examination of the rule.

The Memorandum postponed application of the rule, which was meant to go into effect in April of this year. It will now take effect today, June 9, 2017. As a result of the examination, June 9 through January 1, 2018 will be regarded as a transition period in which certain provisions will not yet take effect. Furthermore, existing business relationships that may violate the rule can be amended or terminated without penalty prior to the conclusion of the transition period.

The rule would seem to de-emphasize the importance of investor due diligence by placing a higher degree of responsibility on vendors and advisors. However, when investigating alternative investment options, always remember that the investor’s risk tolerance, financial situation, and investment education are the strongest tools in maximizing the potential for success in a self-directed portfolio. This will always be true, whether you’re going in alone or you have a team of advisors upholding your best interests. New Direction IRA does not recommend or endorse any particular course of action, but we will always provide the educational framework to help you understand the investment options for your account.

For more information about self-directed investing, please don’t hesitate to contact our office.

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