How 'Fiduciary Standard' Rule May Change Your Investment Advice

April 6, 2016, 11:24 AM EDT / Updated April 6, 2016, 11:24 AM EDT / Source: CNBC

By Sharon Epperson, CNBC

You may have assumed that the financial professional you've relied on to advise you on your retirement savings had your best interests at heart.

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That was not always the case.

Individual investors have more than $24 trillion in retirement savings, including $7 trillion that's stashed away in Individual Retirement Accounts, or IRAs. A new rule announced Wednesday by the Department of Labor is going to change the way people get advice on how to invest that money, by holding investment professionals to what is called a "fiduciary standard."

Here are three important things you need to know:

What the change means

The Labor Department, which regulates tax-advantaged savings accounts, is bringing more investment advisers under an already existing rule known as the "fiduciary standard," which requires financial advisers to put their clients' best interests ahead of their own profits.

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As of now, only financial professionals and firms registered as investment advisers with the Securities and Exchange Commission or individual states follow that rule. Brokers, insurance agents and most other financial professionals are held to a "suitability standard" which gives them significant wiggle room. That means they only need to make investment recommendations that are suitable for their clients, but not necessarily the best option.

Who's impacted?

The rule covers all financial professionals offering investment advice for retirement accounts — including 401(k)s and IRAs. Under the new rule, your adviser must follow the "fiduciary standard" in recommending investments for your traditional or Roth IRA, suggesting investments when rolling over 401(k) assets to an IRA or helping you set up a solo 401(k), SEP-IRA, or simple IRA if you're self-employed. However, an adviser recommending investments for a taxable brokerage account does not need to adhere to the rule.

What happens when

The broader definition of fiduciary will take effect in April 2017, according to the DOL. Until then, if you are not sure which standard your financial professional follows — make sure you ASK!

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Sharon Epperson, CNBC

As CNBC's personal finance correspondent and senior commodities correspondent, Sharon Epperson reports on personal finance for the network and also covers the global energy, metals and commodities markets from the floor of the New York Mercantile Exchange.

In addition to reporting for CNBC and CNBC.com, Epperson is a regular contributor on NBC's Today and Today.comand appears frequently on NBC Nightly News, MSNBC and NBC affiliates nationwide. She also frequently reports for Public Television's "Nightly Business Report," which is now produced by CNBC.

Her book, "The Big Payoff: 8 Steps Couples Can Take to Make the Most of Their Money—and Live Richly Ever After," was a finalist for the Books for a Better Life Awards, honoring works that have "changed the lives of millions." She also was a contributing writer for "The Experts' Guide to Doing Things Faster."

Epperson's personal finance expertise has been featured in numerous publications, including USA Weekend, The Wall Street Journal, The Washington Post, The Boston Globe, Self, Essence, Ebony and Time, where she had covered business, culture, social issues and health as a correspondent prior to joining CNBC.

She is committed to improving financial literacy, particularly in underserved communities. She has been invited to the White House to speak about financial literacy and to moderate a public meeting of the President's Advisory Council on Financial Capability at the U.S. Treasury Department. She also speaks frequently at conferences and events for local and national organizations, colleges and universities about many facets of personal finance.

Epperson has received the Vanguard Award for her distinguished career in business and personal finance reporting from the National Urban League Guild, the All-Star Award from the Association of Women in Communications and the Gracie Allen Award from the American Women in Radio and Television for a series of reports on female CEOs. She also has won awards from the New York Festivals, the New York Association of Black Journalists and the National Association of Black Journalists.

An adjunct professor at Columbia University's School of International Public Affairs for more than a decade, Epperson enjoys teaching the importance of budgeting and building long-term savings as part of her course on professional development for graduate students interested in media careers.

Epperson received her bachelor's in sociology and government from Harvard University, and a master's of international affairs degree from Columbia University. A Pittsburgh native, Epperson lives with her husband and two children in Westchester County, N.Y.

How 'Fiduciary Standard' Rule May Change Your Investment Advice

For Subscribers

FOR SUBSCRIBERSIt’s rarely been harder for people to find new jobs

FOR SUBSCRIBERSCBP leaders cut out of Trump ad buy decision

FOR SUBSCRIBERSAmerican passenger drafted goodbye texts to her family as Flydubai plane plummeted

FOR SUBSCRIBERSCornell rape allegation pushes embattled New York prosecutor into national spotlight

FOR SUBSCRIBERSAbdul El-Sayed tries to woo MAHA voters as Democrats seek inroads with RFK’s supporters

FOR SUBSCRIBERSKratom-like substances are popping up in a typically benign supplement

FOR SUBSCRIBERSGOP super PAC increases its spending for Sen. Jon Husted in tough Ohio race

FOR SUBSCRIBERSRecords reveal tumultuous marriage between slain New York Times executive and wife

FOR SUBSCRIBERSFrom clean energy warrior to ‘wall of shame,’ James Talarico reverses on a fossil fuel money pledge

FOR SUBSCRIBERSCongressional staff planned official trip with luxury stops in Italy and France weeks before election

FOR SUBSCRIBERSA harrowing ordeal aboard an Israel-bound plane

FOR SUBSCRIBERSOpenAI CEO Sam Altman to skip congressional hearing on rogue AI agents

FOR SUBSCRIBERSKey DOJ lawyers departed Trump ‘grand conspiracy’ probe amid pressure to produce, source says

FOR SUBSCRIBERSTrump’s new AI chatbot often links to a site launched under Clinton 26 years ago

FOR SUBSCRIBERSAt MAHA summit, industry CEOs the movement once vilified take the stage

What the change means

For Subscribers

FOR SUBSCRIBERSIt’s rarely been harder for people to find new jobs

FOR SUBSCRIBERSCBP leaders cut out of Trump ad buy decision

FOR SUBSCRIBERSAmerican passenger drafted goodbye texts to her family as Flydubai plane plummeted

FOR SUBSCRIBERSCornell rape allegation pushes embattled New York prosecutor into national spotlight

FOR SUBSCRIBERSAbdul El-Sayed tries to woo MAHA voters as Democrats seek inroads with RFK’s supporters

FOR SUBSCRIBERSKratom-like substances are popping up in a typically benign supplement

FOR SUBSCRIBERSGOP super PAC increases its spending for Sen. Jon Husted in tough Ohio race

FOR SUBSCRIBERSRecords reveal tumultuous marriage between slain New York Times executive and wife

FOR SUBSCRIBERSFrom clean energy warrior to ‘wall of shame,’ James Talarico reverses on a fossil fuel money pledge

FOR SUBSCRIBERSCongressional staff planned official trip with luxury stops in Italy and France weeks before election

FOR SUBSCRIBERSA harrowing ordeal aboard an Israel-bound plane

FOR SUBSCRIBERSOpenAI CEO Sam Altman to skip congressional hearing on rogue AI agents

FOR SUBSCRIBERSKey DOJ lawyers departed Trump ‘grand conspiracy’ probe amid pressure to produce, source says

FOR SUBSCRIBERSTrump’s new AI chatbot often links to a site launched under Clinton 26 years ago

FOR SUBSCRIBERSAt MAHA summit, industry CEOs the movement once vilified take the stage

Who's impacted?

What happens when

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