Under President Trump, financial deregulation could reshape what financial advisors disclose to clients and what products they offer. This could result in increased risk exposure, lower fees and sales prioritized over fiduciary duty. In other words, each executive order from the Trump administration seems to slightly tweak everyone’s financial plan.
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“While most people in finance complain about compliance and regulation, in general, the efforts have made getting good financial advice easier for consumers,” said Jay Zigmont, Ph.D., CFP, founder of Childfree Wealth. “There is a balancing act between having enough regulation to ensure safety and being overly burdensome.”
When it comes to your wealth management and personal financial goals, it’s always a good idea to stay aware of what is coming down the pike from Washington. Here are five questions answered about the ways your financial advisor’s advice could change under Trump.
Will There Be More Options?
Trump’s deregulation of the financial sector could lead to greater access to new financial products, such as alternative investments or easier entry into less-regulated markets.
“This could have the benefit of fostering more diverse portfolios,” said Christopher Stroup, founder and president of Silicon Beach Financial. “Deregulation could also lead to more aggressive retirement plans and investment strategies, which could offer higher returns, but increased risks.”
Stroup said financial deregulation could also improve credit accessibility, which benefits consumers with less traditional backgrounds. Be sure to check with a certified financial planner (CFP) or registered investment advisor to see how the federal government might be altering your investment management.
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Will There Be Improved Access to Investment Opportunities?
Brad Clark, founder and CEO of Solomon Financial, said funds normally reserved for accredited investors could be a big opportunity for the average investor. Potentially, this means you won’t have to jump through hoops to buy, sell, earn money or tweak your investment portfolio.
“Regulators have made the determination that if an investor does not earn enough or have enough investible assets, they are not smart enough to invest in certain funds,” Clark said. “Most accredited investors have no better understanding of the market than the typical investor. The regulators could not be more off on this.”
In addition, Clark said there can be good reasons for consumers to invest in a financial product that offers a large upfront bonus and then slowly withdraw funds over time. “Regulators tend to look at this as ‘churning,’ but it can be a great strategy or opportunity for clients,” he said.
Will There Be Potential Conflicts of Interest?
Deregulation may make it more challenging for consumers to find good financial advice that is free of conflicts. “For example, there has been a long-standing battle over whether everyone giving financial advice has to be a fiduciary,” Zigmont said. “A fiduciary has to put your interests ahead of their own.”
Zigmont cited the U.S. Department of Labor’s efforts, reported by Reuters, under the Biden administration to “close a loophole in fiduciary standards that didn’t apply to recommendations for purchases of non-securities, such as fixed index annuities, which insurance companies typically sell.”
According to Reuters, “Investments in such annuities are attractive to risk-averse investors and have grown rapidly, but also come with higher costs. The [Biden] White House estimated the fiduciary rule could have saved retirees $5 billion a year on such investments.”
However, the insurance industry challenged the Biden-era regulations. According to Reuters, a federal judge blocked these regulations last year and sided with insurance groups who “argued that the rule improperly treated as fiduciaries those who provide one-time recommendations to retirees, such as for rolling over investments from an ERISA plan to an individual retirement account, or IRA.”
Will Trump Policies Weaken Protections?
Deregulation could weaken protections, like transparency in fees or accountability for financial products.
“To safeguard your finances, consumers should do thorough research, diversify their investments and work with fiduciary advisors who are committed to their clients’ best interests,” Stroup said.
He recommended asking potential advisors about how they’re paid — for example, if they receive commissions or are offered incentives to recommend certain products to their clients. “Seeking independent advisors and reading the fine print of your investment options can help you avoid conflicts of interest.”
Zigmont said financial deregulations could create a “buyer-beware mentality” among consumers, especially regarding the compensation structures of their financial advisors.
“Fee-only financial planners are paid only by their clients and receive no commissions or incentives to push products,” Zigmont said. “If you are getting ‘free’ financial advice, you need to know that the planner is getting paid to sell you something.”
Will There Be Lower Fees?
Deregulating the banking or insurance sectors could reduce compliance costs, which could be passed on to the consumer through lower fees. Whether you are tweaking your estate plan or need help with your investment strategy, it is beneficial when you pay less to get quality help.
“Additionally, easier entry into fintech could provide consumers with more options, improved accessibility and reduced costs for specific financial services,” Stroup said.
Caitlyn Moorhead contributed to the reporting for this article.
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This article originally appeared on GOBankingRates.com: 5 Ways Trump’s Policies Could Alter Your Financial Advisor’s Advice
