This Fiduciary Loophole Can Jack Up Your IRA Fees
The Department of Labor's new fiduciary rule requires retirement account advisors to hold themselves to a fiduciary standard. In brief, that means they must always put the clients' needs above their own. Fiduciary rules limit the kinds of fees that fiduciaries can collect, but the Department of Labor has provided an exception to give retirement advisors more flexibility.
Unfortunately, this exception can become very expensive for retirement savers.
Fiduciary rules don't allow advisors to collect any kind of variable compensation; they're limited to fixed fee reimbursements only. That's because variable compensation creates an inevitable conflict of interest for advisors. If an advisor sells two different products, one of which earns him a $100 commission and the other of which earns him a $10,000 commission, he's highly motivated to recommend the second product instead of the first -- even if the second product isn't the best choice for his clients. Indeed, financial products that pay enormous commissions to advisors often do so because the advisor would be unlikely to recommend them otherwise.
Source: Fool.com
