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Know Your Rights When Getting Financial Advice

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Your financial adviser is not currently legally required to act in your best interest.

Financial companies often pay advisers more to promote certain products rather than to recommend what is best for their customers which creates a conflict of interest.

These conflicts of interests sometimes can cause advisers to give bad advice.

Americans lost $17 billion last year due to conflicted advice from their financial advisers on their IRAs alone. (President’s Council of Economic Advisers)

The Department of Labor’s recently adopted Conflict of Interest Rule which protects retirement investors by requiring advisers to adhere to a fiduciary standard and give advice that is in the investor’s best interest.

Read the following excerpts of FAQs provided by the DOL on the new rule. To read longer explanations, click here.

BACKGROUND FAQs

Q1. Why did the Department adopt the Rule?

A. The Department adopted the Rule to better protect retirement savers when they receive investment advice.

 

Q2. Will the Rule cause change in the financial services industry?

A. Yes.

 

Q3. Will the Rule better protect my retirement savings?

A. Yes.

 

Q4. Which financial advisers are fiduciaries under the Rule?

A. A fiduciary is someone who is paid for giving investment advice about retirement accounts.

 

Q5. What loopholes are being closed by the Rule?

A. The Rule closes the large loopholes that permitted conflicted investment advice

 

Q6. Why did these loopholes get the Department’s attention now?

A. Recent research has found that advisers’ conflicts cause real harm to ordinary investors who rely on their advice.

 

Q7. How much do America’s working families lose due to conflicted advice?


A. About $17 billion per year

 

Q8. How much does a typical worker lose due to conflicted investment advice?

A. 1 percent more in fees every year on a $100,000 account earning 6% could cost you $16,000 over 10 years.

 

Q9. I’ve heard that some advisers will get “exemptions.” What does that mean?

A. They must comply with certain conditions designed to ensure they act in your best interest.

 

Q10. What happens to financial advisers if they provide investment advice that is not in their retirement investors’ best interest?

A. Investors will be able to hold them legally accountable.

 

Q11. Will the Rule prevent me from getting advice paid for with commissions?

A. No.

 

FAQs About My Adviser

Q12. Who is a fiduciary adviser under the Rule?

A. When your financial adviser is paid for making an investment “recommendation” about your retirement accounts, he or she is a fiduciary.

 

Q13. What counts as a fiduciary “recommendation” as opposed to general investment education?

A. A “recommendation” is a suggestion that you take a particular course of action.

 

Q14. What does it mean to me to have investment advice provided by a “fiduciary”?

A. A fiduciary must act prudently and solely in your best interest when he or she gives you investment advice.

 

Q15. What does it mean to me to have investment advice provided in my best interest?

A. It means financial advisers must put your financial interests in the driver’s seat, rather than their own competing financial interests.

 

Q16. Is my adviser liable if I lose money in my retirement account when I follow his recommendation?

A. No.

 

Q17. Does the best interest standard mean that my financial adviser must search for and identify the absolute best product for me?

A. No.

 

Q18. Can I continue to work with my financial adviser after April 10, 2017?

A. Download this list of questions to ask your financial adviser.

 

FAQs About IRAs, 401(k) Plans and HSAs

Q19. My broker tells me that he is a fiduciary when he gives me advice about my 401(k) and IRA account investments, and not a fiduciary for my after-tax account. Is this true?

A. It could be.

 

Q20. My financial adviser tells me that he is providing me with investment education but not advice. What is the difference?

A. Education is general financial and investment information and cannot include an investment recommendation.

 

Q21. I receive financial advice from a stockbroker and an insurance agent for my 401(k) plan investments. Does the Rule apply to these types of financial advisers? 


A. Yes.

 

Q22. My financial adviser says he must switch my IRA from a “non-advisory” account where I currently pay commissions for each transaction to an “advisory” account for which I will pay an annual fee based on the assets in my IRA. Do the Rule and exemptions require this change? 


A. No

 

Q23.  Do the Rule and exemptions limit the investments that I can hold in my IRA?

A. No.

 

Q24. Does the Rule restrict my broker from following my direction?

A. No.

 

Q25. What circumstances require my financial adviser to give me a “Best Interest Contract” for my IRA investments?

A. If you pay for investment advice through commissions.

 

Q26. I participated in a 401(k) plan at an old job. Can I get investment advice on what to do with my account in the 401(k) at my old employer?

A. Yes.

 

Q27. My financial adviser said my IRA will be grandfathered. What does that mean?

A. Your financial adviser will continue to provide advice on your existing investments but will not provide you with a Best Interest Contract.

 

FAQs About Timing And More Information

Q28. There are reports that the Department has fined financial institutions that are not compliant with the Rule. Is this true?

A. No.

 

Q29. When do the Rule and exemptions become applicable?

A. April 10, 2017

 

Q30. Where can I find more information on the Rule and exemptions?

A. Click here for more information.

Do You Know Your Rights When it Comes to Retirement Advisers?

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Beginning on April 10, 2017, retirement investors will benefit from important new protections requiring that financial advisers act in their best interest. While many investors think that their financial adviser already is required to act in their best interest – like their doctor or their lawyer – the law hasn’t always required it. Financial companies often pay advisers more to promote certain products rather than to recommend what is best for their customers. That incentive creates what is known as a conflict of interest. And conflicts of interests sometimes can cause advisers to give bad advice.

Read through the following questions and answers to get to know what your rights will be once the law goes into effect. 

Water Cooler Wisdom: Fourth Quarter 2016 The “Trump Bump”

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The U.S. stock market soared after Trump’s electoral victory.  Investors and traders put bets on his pledge to reduce corporate tax rates, pull back regulations and increase infrastructure spending. As seen in the chart on the right, fourth quarter returns for the U.S. stock market were higher for small companies and value-oriented stocks. Looking forward, the common theme among market forecasters is a low to moderate US stock market return (mid-single digit). This may be due to current valuations (see chart below) with price to earnings ratios well above their historical norms and an underlying fear of bubbles resulting from the Great Recession.

During a market update call on January 10th, an adviser asked if the “Trump Bump” could really be paid for by the President-elect.  The market strategist explained it may be possible through reducing corporate tax rates and that every 1% drop in the effective corporate tax rate potentially generates an additional $1.50 of earnings for the S&P 500, currently at $115 per share (see attachment “Corporate profits”).
“If Trump dropped the current effective tax rate from 26% to 18%,” the strategist hypothesized, “earnings per share would increase to $128 and pay for the rally.” Ironically, “in each year from 2006 to 2012, at least two-thirds of all active corporations had no federal income tax liability…for tax years 2008 to 2012, profitable large U.S. corporations paid, on average, U.S. federal income taxes amounting to about 14 percent of the pretax net income that they reported in their financial statements (for those entities included in their tax returns).”[1]

So, what do we know?  There is a general concern about a continued decline in Treasury prices that coincides with the expectation of three Federal Reserve rate hikes in 2017. Also, leading economists like Trump’s commitment to infrastructure spending and believe it will boost non-college wages and jobs while, at the same time, they strongly disagree with his isolationist policies and deregulation of the energy industry.[2]

What we don’t know?… the price of populism. I could not find an estimate on the timeframe or projected cost to Americans that economists fear.  By the time you read this, America will have inaugurated Donald Trump as President of the United States and we will be embarking on his “100-day action plan to Make America Great Again” (attached). Whether it’s due to economic insecurity or a cultural backlash, Europeans and Americans have voted for protectionist leaders that have made big promises of change. Perhaps America will be the model for Brexit.

[1] GAO-16-363:  Published:  March 17, 2016 “Most Large Profitable U.S. Corporations Paid Tax but Effective Tax Rates Differed Significantly from the Statutory Rate”

[2] httpss://www.igmchicago.org/surveys/100-day-plan

Here’s to a Successful Financial 2017!

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Are you ready to make 2017 the year you finally get all your finances in order?

 

Do you ever find yourself asking some of the following questions:

  • Should I focus on paying down my credit cards first, or should I start putting aside money for retirement?
  • Should retirement fund planning come before saving for my children’s college?
  • How much should I have in an emergency fund?
  • How do I know how much to allocate towards savings, retirement, and an emergency fund?
  • What type of accounts should I put my retirement money in?

These questions are what makes getting your finances in order so overwhelming.

Announcing Onward!

Onward is our new Individual Financial Planning monthly subscription model that will lead you through all the necessary steps to meet your financial goals.

Here’s how it works:

  • Initial meeting to determine:
    • Current financial situation
    • Financial needs
    • Financial goals
  • Castle Rock Investment Company creates a unique plan to address your most pressing needs. For example:
    • Do you already have savings? If not, we work with you to include it in your budget.
    • Do you have life and disability insurance? If not, we call one of our trusted contacts to reach out to you. We provide our recommendations to them based on your goals.
  • Castle Rock Investment Company develops a highly individual plan to meet all of your future needs to help you meet goals. This may include some of the following:
    • Retiring early
    • College savings
    • Paying off debt
    • Investing more (or less) aggressively
  • You get to be in the driver’s seat! Each of the plans include an estimate of the number of hours that it will take to meet your financial needs. You choose how much you want to spend each month or how quickly you want the tasks completed. We work at your pace!
  • Castle Rock Investment Company provides monthly reports on work completed, so you always know you are receiving value for your money.
  • If at any time you need a service or product we don’t provide (car insurance, for example), we will work with our trusted contacts to find exactly what will help you meet your needs and goals.

Onward subscriptions are $100/hour. (50% off our project based fees!)

If your finances are simple, you may only need to purchase 1-2 hours a month to work through everything you need to have your finances in order.  More complicated finances may need more hours or take longer to complete, you decide!

Take a look at our price list to see how long various tasks take.

At no time do we charge any fees or take commissions on any of our recommendations. You will always pay the same subscription rate, $100 an hour, for as many hours as you’ve chosen each month.

Make 2017 the year you get your finances under control! Call Michele Suriano at 303.725.7086 today to set up an appointment. You can also email at MSuriano@CastleRockInvesting.com, or just stop by and visit at 333 Perry Street, Suite 208 in Castle Rock, CO.

 

Ask Your Financial Adviser: Do You Adhere to the Fiduciary Standard?

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Fiduciary Financial Adviser EthicsGive your Financial Adviser a call this week and ask them this question:

“Do you adhere to the Fiduciary Standard?”

This one question could save you a great deal of money.

If they say yes, this means they are putting your interests first when recommending where to invest your retirement funds.

If they say no, then they are able to make recommendations that benefit them (in the form of a commission, for example) even if it is not the best choice for your money. It’s probably time to walk away.

Consider your retirement money and how hard you’ve worked for it. Do you want your adviser to put your interests first? 

Over the next couple of weeks we’ll discuss more about how working with an adviser that is not a Fiduciary can impact you, and we’ll cover some of the misinformation out there about the Fiduciary Standard which will go into affect April 10th, 2017.

Castle Rock Investment Company has been a Fiduciary since opening 10 years ago. Our project based and monthly retainer pricing model ensures that you always know how much you are paying us. We value transparency and never charge hidden fees or earn a commission on our recommendations.

Call us at 303.725.7086 or email Michele Suriano at MSuriano@CastleRockInvesting.com today to start working with a Financial Adviser who will always put your interests first.

Family Love Letter Event

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Did you know you can gift your Itunes, American Express points, and airline miles to a designated recipient in the event of your death (but only if it’s included in the will!)? Or that if a family member dies you can get refunds on their unused subscription accounts?

These are just a couple of the interesting facts we learned last night at our Family Love Letter event. 

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We were fortunate to have Karen Shirley, an estate planning attorney, to answer our questions about our wills!

We also received tools to gather all our information in one place for our families. We each walked away with a booklet where we will provide a huge amount of information, from informing our loved ones what type of burial we desire to passwords of accounts that will need to be closed if something happens to us.

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Great food!

We had a fun (and sometimes emotional) night of good food, sharing, and learning incredibly valuable lessons. 

Karen Drancik from Neuberger Berman kicked off the evening by sharing stories of individuals in situations with an incapacitated family member (due to Alzheimer’s, dementia, or in some cases, death) and went through extraordinarily stressful situations trying to locate information during their time of grief and confusion. She also shared stories of individuals who had completed their Family Love Letter booklet and gave their families an enormous gift of peace during that time.

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Karen Drancik sharing stories and information on how to get your affairs in order before you’re unable.

Karen explained how having difficult conversations before it becomes urgent can help families avoid overly emotional discussions and rash decisions for everyone involved. Developing a plan that includes what is valuable to family members, who will make decisions if someone is incapacitated, and dictating what you wish for your funeral can bring peace during a tumultuous time.

Simply documenting all information that family members will need to know and keeping it somewhere they can locate it easily is an enormous gift to your loved ones. The Family Love Letter booklet takes it a step further by inviting you to write down beloved traditions and even recipes to remember you by.

We were reminded to create a plan for surviving pets, and to create a list of people in your life who should be contacted in the event of your death. 

We discussed that it would perhaps be easier to create all these documents digitally, but writing them in your own hand will provide a valuable keepsake for your family. One individual in the audience still has the document his grandfather wrote describing his Ethical Will, describing what he hopes his family will remember of him. Family Love Letter provides a space for you to write these items down.

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Attendees were surprised at the amount of information included in the Family Love Letter booklet they hadn’t thought of.
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Several audience members inquired how to handle situations with their parents.

Several members of the audience had very emotional questions pertaining to their parents who are suffering from Alzheimer’s, and mentioned how much they wished they had come across a tool like Family Love Letter before their parents began to forget details. Others had questions about whether someone without children or a spouse should have a document like this. (Karen’s response, by the way, was a resounding “YES!”)

Take a look at what one of the attendees had to say about the evening:

“Several years ago, my husband and I took a trip to India. Preparing for the trip made me begin to think of things I should share with my family in the event of a tragedy. I tried to think of any information they might need, and started putting together a binder of information for them with information on bank accounts, insurance, stocks, and other important materials.

Last night, I attended an event called “Family Love Letter – A Holiday Affair” hosted by Castle Rock Investment Company.

Karen Drancik presented a brilliantly concise and thoughtful method of capturing all the necessary information for a surviving family when one passes away. This not only includes financial and investment information, but every imaginable detail including people to notify, funeral and burial wishes, down to a request to airlines to disperse frequent flier miles.  What an amazing gift to leave my loved ones!

Thank you, Castle Rock Investment Company, for this important tool!”

-Becky Smoldt

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Michele Suriano and Ashley Coombe of Castle Rock Investment Company.

We look forward to hosting the event again in the future. Please sign up for our newsletter if you would like to receive information about dates. If you’d like to set up a time to meet with us to go over this information individually, please call Michele Suriano at 303.725.7086. We look forward to hearing from you! 

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Will Trump Repeal the Fiduciary Rule?

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For those who work for Broker-Dealers and Registered Investment Advisers, no one is certain whether Donald Trump or the Republican Party will attempt to eliminate the Fiduciary Rule or keep it intact. But before we get ahead of ourselves it is important to ask one question, will Donald Trump or the Republican Party be able to dismantle the Fiduciary Rule before it becomes enforceable on April 10th, 2017?

Although we cannot answer this question in confidence just yet, repealing this legislation will be quite a task for a few reasons:

  1. With the Fiduciary Rule being effective since April 2016, the rule cannot just simply be thrown out by an executive order. It is also worthy to note that the legislation took 6 years to be written, so the likelihood of the DOL eliminating it is extremely slim.
  2. Broker-Dealers, Insurance Firms, and Investment Advisers have already spent significant resources in designing compliance friendly products and re-inventing their business platforms. So, if the rule were to be thrown out, the government could have dozens of lawsuits on their hands, especially from those who were for the rule.
  3. Despite the Republican Party holding the majority in Congress, they still do not have enough seats to overthrow a filibuster from the Senate. In addition, repealing legislation can take months or even years, during which the rule could have been enforceable for a notable amount of time.
  4. With Donald Trump already planning to tackle dozens of issues in his first 100 days, repealing the Fiduciary Rule is more than likely not his top priority. The rule will also become enforceable by the 80th day of his presidency.

Although it appears that the Fiduciary Rule is here to stay, we will keep you updated if there is anything that will threaten the rule.