On June 9, the U.S. Department of Labor’s Fiduciary Rule—the most famous and controversial set of investment regulations you’ve probably never heard of—is going to start taking effect. The rule promises better protection for investors who employ financial advisors to help manage their retirement accounts, including rollovers into an Individual Retirement Account.

The Fiduciary Rule has been debated for years. After the financial meltdown in 2008, when investors lost so much money, there was a populist movement to force corporations to become more transparent about their records and for financial firms to be more forthcoming about the true costs and risks of investments they sold. The concept of fiduciary, however, has a much longer history. “Fiduciary” is a centuries-old legal term, based on the Latin “fiducia,” meaning trust. The fiduciary has the power and the obligation to act in total trust, good faith and honesty.

This rule mandates that anyone who provides investment advice related to any kind of retirement account has to act in the best interests of their clients. The specific requirements, include:

  • Act with care, skill and prudence in assessing a client’s needs, risk tolerance and time horizon
  • Put the client’s interest first, ahead of the financial advisor’s or the firm’s
  • Get paid reasonable compensation
  • Make no misleading statements about investment transactions, compensation, and conflicts of interest

What does this rule mean to you as an investor? If you work with a registered investment advisor (RIA), you will see few changes. RIAs are already fiduciaries under the Investment Advisers Act of 1940, which is administered by the federal Securities and Exchange Commission and requires them to act in the best interests of their clients.

Brokers, while regulated, have been held to a different standard, called “suitability.” They need to suggest products that are reasonable and appropriate, but not necessarily in the client’s best interest—especially when it comes to cost. Much of the rule has impacted financial advisors working as brokers at brokerage and fund companies, or insurance agents, or advisors at banks.

Whether you work with an RIA or a broker, you may find that you have to sign some new paperwork, perhaps in the form of an amended service contract. The official name for this is the Best Interest Contract Exemption, or BICE. This will make it possible for your adviser to continue recommending products that do not comply with the new guidelines. If you receive such paperwork, you may want to have a discussion with your advisor to see why they recommended the current investment product or if there is an alternative you should now consider. Under the current rule, your advisor doesn’t have to send you a BICE until January 1, 2018. However, the new Secretary of Labor, Alexander Acosta, has said that the rule is still under review and may undergo some changes between now and then.

For clients working with Theus Wealth Advisors, it is business as usual for us with respect to the new fiduciary rule. As a Registered Investment Advisor regulated by FINRA and the SEC, TWA has always operated with the highest level of fiduciary standard and in the best interest of our clients. We only work with conflict-free ERISA 3(38) investment managers who also proudly served as a fiduciary to our clients.

Fiduciary Rule or not, it is always a good idea to ensure that you fully understand your financial advisor’s philosophy, vis-a-vis your own investment philosophy; compensation structure and commitment to your best interest. If you’re not sure what this means, it’s time to ask.