Finance

"If I tell someone I’m a financial
adviser, they immediately start
to duck, thinking that I’m trying
to sell them something.”
— Mike Chamberlain, certified financial
planner and accredited investment fiduciary,
Chamberlain Financial Planning & Wealth Management
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who earn commissions typically make
money when they sell the customer a
specific product. Those who advise
retail investors say that generally,
the interests of fee-only advisers are
more likely to align with those of their
clients because they don’t have the
conflicts of interest that advisers on
commission do.
Conflicted financial advice costs
retirement savers millions each year.
A 2015 White House Council of Economic
Advisers analysis estimates
that hidden fees and commissions
drain away about 1 percentage point
of their investments annually. That
doesn’t sound like much. But if true,
because of the power of compounding,
an investor’s nest egg expands 25 percent
less than it otherwise would over
the course of 35 years. That means a
$10,000 investment would grow to just
$27,500 instead of $38,000 over that
time frame, according to the council.
All told, such losses cost U.S. savers
$17 billion a year, the study concludes.
“The fees and disclosures have
been awful in the IRA marketplace,”
says Mike Genovese, partner at
Genovese Burford & Brothers in Sacramento.
“It’s been a tough go for the
consumer in this country, because so
many [advisers] are incentivized to get
[clients] to roll over their money and
pay exorbitant fees,” he says.
The new regulation applies to any
advice on tax-advantaged retirement
plans given by independent securities
broker-dealers, insurance brokers, financial
planners and other financial pros. It
doesn’t ban commissions, but advisers
have to be able to show that they didn’t
benefit by recommending one product
over another. Advisers who still want to
earn commissions will have to present
their clients with a contract stipulating
that, among other things, the adviser will
act in the client’s best interest, receive
only reasonable compensation and disclose
how he or she gets paid.
But there’s one feature that makes
the best-interest contract important: It
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November 2016 | comstocksmag.com 73