Often, people preparing to make crucial decisions about their retirement investments seek the advice of their insurance agents and stockbrokers before diving into an investment plan. Traditionally, agents and brokers are in business to sell products to their clients. This is in contrast to those working as investment advisors, who, under the Employee Retirement Income Security Act of 1974, are required to seek only the best interests of their clients. Tennessee brokers and insurance advisors may be rejoicing in a recent appeals court ruling that upheld the original ERISA concept of a fiduciary.
Changes in the rules regarding the designation of fiduciaries resulted in a lawsuit against the U.S. Department of Labor, which attempted to broaden the scope of a fiduciary. The new rules said that anyone who offered advice or counsel about retirement accounts must have the client’s best interests as the primary concern. Previously, anyone receiving a commission for the sale of investment products and making no claims to the contrary was exempt from the fiduciary requirements.
The recent ruling by the Fifth Circuit Court of Appeals vacated the decision of a lower court upholding a rule instituted by the DOL two years ago. The appeals court’s majority opinion noted that the new law left these advisors open to lawsuits by disgruntled investors. The 2-1 decision also noted that the DOL had abused its power by creating rules not authorized by ERISA.
Tennessee investors are free seek advice from those from whom they are purchasing retirement products. However, when it comes to participating in employment retirement programs, the advice they receive falls under ERISA protection. When a fiduciary fails to act in the best interests of a plan participant, that participant has the right to take legal action to protect his or her investment.
Source: Barron’s, “Appeals Court Voids DOL Fiduciary Rule“, March 16, 2018