Earlier this year, the U.S. Court of Appeals for the 5th Circuit effectively repealed a rule from the Department of Labor requiring financial advisers to meet some of the same legal requirements to which real estate agents, attorneys and other professionals must adhere serving their clients. While the so-called “fiduciary rule” isn’t exactly dead yet, it probably isn’t going to be enforced either. So what does that mean for investors looking for a new financial adviser?
In all honesty, not a lot. The new rule went into effect in part last year, so it’s a bit of a return to the status quo. Here’s what happened: The new rule was met with a lot of criticism from a number of groups, financial advisers in particular. It was intended to ensure brokers and other financial planners and advisers make investment recommendations in the best interest of their clients. For example, if your adviser were to choose one investment for your portfolio over another because it paid them a higher fee but had a lower rate of return for you, the fiduciary rule would have smacked them.
The 5th Circuit’s ruling has essentially repealed the Department of Labor’s enforcement of the rule. It technically remains in effect, but it has been rendered virtually meaningless.
How to choose a good financial adviser
This means investors should do their due diligence in choosing any kind of financial adviser. Here are five things you can do to ensure you get an adviser who acts in your best interest:
1. Choose a certified financial planner
Certified financial planners are trained and held to a code of ethics. They also take mandatory classes to maintain their licenses. This helps ensure they are aware of the latest industry standards and that someone is keeping an eye on their work.
2. Ask how they get paid.
If the planner you’re considering gets paid a commission instead of a flat, hourly rate, they have an incentive to choose investments that are in their own best interest. Members of the National Association of Personal Financial Advisors are fee-only and accept no commissions for their work.
3. Do they follow a code of ethics?
Ask if they follow a code of ethics and make sure you read it. If you see “fiduciary” in the language, your planner has agreed to put your best interests first.
4. Are they working for someone you know and trust?
Getting a recommendation from a friend or family member is a great way to find an adviser, but you should still do your due diligence as outlined in steps one through three.
5. Run a background check.
This may sound complicated, but it’s pretty simple. Start by asking your potential adviser if they’ve ever been convicted of a crime. Also ask if they’ve ever been investigated by a regulatory agency or industry group, and, if so, if they were found guilty or responsible of any wrongdoing. It’s also a good idea to Google them. Finally, ask for references of current clients.
Can’t I just do it myself?
If your investments are solely through an employer plan like a 401(k) and you’ve only just begun to invest, a self-directed program may be all you need for now. But as your investments grow and become more complicated, choosing an adviser can be a wise decision. Just like you’d go to a professional to extract your teeth or install your septic system, turning over your investments to a professional also typically results in better outcomes.
Another benefit to hiring an adviser is that they help keep you disciplined when it comes to your short- and long-term investment strategies. They frequently also can help with reviewing employment and other contracts, insurance policies and other legal vehicles.
Worried about your retirement nest egg? Here are five fast ways to start saving more.
This article originally appeared on Policygenius.