With the fiduciary rule reversed, here's what to do

An important rule that would have protected investors has been overturned. The 5th U.S. Circuit Court of Appeals recently decided to reverse the U.S. Department of Labor's fiduciary rule, an Obama-era regulation that would have required financial institutions and advisers to act in the best interests of their clients when making recommendations regarding retirement investments. This represents a major victory for financial services groups under President Donald Trump's administration.

What does this mean for consumers? One way to gain insights into the impact on your finances is to observe who are the opponents and proponents of the fiduciary rule.

The U.S. Chamber of Commerce, the Securities Industry Financial Markets Association, and insurance and investment industry groups opposed the fiduciary rule, and several filed lawsuits to overturn it. They argued that it was too costly and burdensome, and could inhibit lower-income Americans from obtaining financial advice.

Now these groups are celebrating the Appeals Court decision. For example, the American Council of Life Insurance and National Association of Insurance and Financial Advisors recently issued a joint statement that applauded the rule's overturn as a win for American savers.

On the other side, many consumer groups supported the fiduciary rule, including AARP, the Financial Planning Association, the National Association of Financial Planners and the Consumer Federation of America. Many financial institutions already act as fiduciaries on behalf of their clients, and they use that distinction as a marketing advantage. Examples include the Financial Engines (with over $100 billion of assets under management), the Garrett Planning Network, McLean Asset Management, and United Income.

This legal ruling, together with the Trump administration's recent cutbacks at the Consumer Financial Protection Bureau, make it clear that under the current administration, protecting consumers will take a lower priority compared to deregulating the financial industry.

This means you are the best person to act in your own best interest. Go shopping for advisers and financial institutions rather than being sold by advisers who seek you out. Look for advisers and institutions you can trust who will act as a fiduciary on your behalf, and avoid those that won't act in your best interests. That's the free market in action.

Ask the following questions of potential financial advisers:

• Will you act as a fiduciary on my behalf?
• How are you paid? Avoid advisers who'll make a large commission by investing your retirement savings because they may be motivated to sell you products rather than make recommendations in your best interest.
• Do you receive any type of compensation in addition to what I'm paying you? For example, are you receiving a commission from an insurance company or mutual fund company that could create a conflict of interest when you recommend a particular product?
• Are you dual-registered? Some advisers are registered as investment advisers and broker-dealers. Usually a broker-dealer is acting as a salesperson. If your adviser is also a broker-dealer, ask what role he or she is assuming when providing advice to you.
• Have you ever been cited by a regulatory or professional body for disciplinary reasons?

Don't be shy. You deserve to ask questions of advisers and institutions who'll be profiting from your business. Be wary of any advisers who won't give you straight answers to these questions or provides a contorted rationale about why it's not important that they act as a fiduciary on your behalf. Be a savvy consumer -- it's your money and your retirement.

Be particularly vigilant in certain situations that are ripe for exploitation:

• When you're leaving a company at which you have a large 401(k) balance and are deciding whether to leave your savings with that former employer or roll into a new plan. Some advisers may urge you to invest your savings with them, even though your 401(k) may offer more cost-effective investments.
• If you're offered a lump-sum payment from your defined-benefit pension plan and are deciding whether you should accept the payment. (Hint: In most cases, you'll receive less retirement income by accepting the lump-sum payment).  Be particularly wary of advisers who urge you to accept the lump sum and invest it with them.
• When you're deciding the best age to start your Social Security benefits, be wary of advisers who urge you to take benefits early and invest the income with them.

The court's decision to overturn the fiduciary rule confirms that sage advice: Buyer beware.