Finding a financial advisor who puts you first

The U.S. Department of Labor recently proposed regulations that would require advisors to act as fiduciaries, putting their clients' financial interests above their own when making recommendations about how to invest the funds in your 401(k) and IRA and deploy them in retirement.

One of the key features of the proposed regulations is something called the "best interest contract exemption" (BICE). This provision would allow financial institutions to continue prevalent compensation practices for their advisors such as revenue sharing and commissions.

Because the Labor Department thinks this way of compensating brokers and advisors leads to conflicted advice and increased costs to consumers, the BICE rules have significant strings attached: They would require financial advisors to enter into a legally enforceable contract with each individual investor that pledges to put the consumer's interests first without regard to how the advisor is compensated and to disclose any potential conflict of interest.

The BICE provisions are one of many proposed regulations that financial industry representatives maintain are unworkable and would increase administrative and compliance costs that would be passed along to consumers.

The Labor Department previously proposed fiduciary regulations in 2010 but withdrew the rules in 2011 after fierce opposition from the financial industry. It's taken the department four years to redraft the proposals, but given the current controversy and intense pushback from the financial industry, it's unclear if and when these regulations will be adopted.

While the government's push for advisors to be fiduciaries is certainly a desirable goal, the best way for you to secure your retirement is to be a diligent shopper for financial products and advisors. Let's see how you can do this.

Goals for seeking professional help

Even if the regulations are eventually approved in some form, they can't guarantee that you'll have a financially secure retirement or that your advisor will help you achieve your goals.

Given the complexity and importance of retirement planning, it's entirely understandable and reasonable that you might seek professional help. Your goal is to find advisors who are qualified and will recommend the most effective retirement strategy and investments given your goals and circumstances, and you'll find plenty of competent advisors with integrity are out there.

What does it really mean for an advisor to put your interests first? Such an advisor would take the time to learn about your goals and circumstances, and only then recommend a portfolio of financial products and services that best meet your situation. The advisor should be familiar with the range of investing and insurance products, along with their particular pros and cons.

A good advisor would not be partial toward or against any particular type of retirement product before learning about your circumstances, such as an insurance salesperson who automatically dismisses stock market investments or an investment advisor who proudly admits she hates annuities.

Once the advisor identifies the best combination of retirement products that are appropriate for your situation, the next step should be to seek specific products and services that are priced fairly and have a reasonable chance of delivering net returns in line with common benchmarks. The advisor should use a rigorous methodology that incorporates research, analysis and data for making recommendations, rather than rely on hunches and intuition.

Key questions

Here are some points to cover when interviewing any advisor you may be considering:

• Will you act as a fiduciary in my situation? If not, how will you serve my best interests?
• What exactly is the service you're providing? Possibilities include deciding which types of investments are appropriate for you (asset allocation), selecting specific investment products, helping you decide how much to save for retirement, when to claim Social Security and developing strategies to deploy your assets in retirement.
• How are you paid for these services? Do you earn a commission on each transaction, are you paid a percentage of assets under management or do you charge an hourly rate or flat fee? In my situation, how much will you be paid, both now and in the future?
• What is your professional training? What credentials do you have?
• Please summarize the methodology you use for making your recommendations. How do you make sure that the products you recommend are priced fairly?

A good advisor should be able to answer these questions in language you can easily understand. It's just common sense to ask what you're getting and how much you'll pay for it.

The bottom line: Spend the same amount of time and attention shopping for financial advisors and products that you might with any other critical financial decision, such as buying a house or car. Doing your homework before any big purchase or financial decision will help you protect your assets and plan for a worry-free retirement.