Ask Terry Questions New Labor Department rule concerning fees for IRA trades and broker standards

New Labor Department rule concerning fees for IRA trades and broker standards

By Terry Savage on June 01, 2017 | Investments

My broker has suggested that I agree to a new fee process wherein I would pay an annual percentage of my IRA balance instead of commissions on individual trades and she would be authorized to use her discretion in making trades, without my authorization. She has sent to me a brochure about the new rule that is incomprehensible to me, and such a broad agreement to permit trades without my authorization seems a dangerous step. Where can I find information about this rule, in plain English, and do you have an opinion on this matter?

Terry Says

You're talking about the new Fiduciary Rule, that requires brokers who deal with IRAs to fully disclose all fees and commissions and to put the clients interests ahead of their own.  Many brokerage firms, sadly, are saying the only way they can comply is NOT to disclose commissions, but instead to charge a management fee on all assets in the IRA, even those that don't trade and have money in money market deposit accounts.  This is ridiculous -- but it keeps the brokerage firms "safe" from claims that they are not acting as fiduciaries. I would NEVER give a broker authorization to make trades without consulting me.  Never, ever!  And if you decide to ROLL OVER your IRA to Vanguard or Fidelity or T. Rowe Price or American Century -- all no-load, no-commission mutual fund companies -- you will pay a LOT less each year, and they will  help you diversify your investments appropriately between their funds.   That's what I would do in your position.  Call any of these fund companies, ask about annual fees for IRAs, and underlying fees for their mutual funds.  You will see what I mean.  They can handle the rollover to make sure there are no tax issues.  There should be none if done correctly.

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