The SEC recently passed new regulations it says will ensure that brokers act in their clients' "best interest." But what does that mean for you?
Brokers and advisers must disclose information about fees, costs and potential conflicts of interest.
Consumer advocates have long argued for more rules to protect Americans seeking advice and other help investing their money. They say investors lose billions of dollars a year because of advice from brokers whose financial incentives are at odds with their clients' best interests.
The "best interest" rule, as it is known, changes things more for brokers than advisers.
Brokers sell stocks, bonds, mutual funds, annuities and other investments, which they may recommend to clients. They often receive commissions for selling specific products. Currently, they are only required to make suggestions based on what is "suitable" for their client, based on the client's age, goals, risk tolerance and other factors.
Under the new rules, brokers cannot put their own interests ahead of that of their clients. They will also not be allowed to use the term "adviser" as part of their name or title in dealing with retail investors.
Investment advisers, on the other hand, were already required to divulge their potential conflicts of interest and put their clients' interests above their own. The new rules don't prohibit conflicts of interest, they just require that advisers disclose them.
Critics, such as AARP and the Consumer Federation of America, say the new rule doesn't go far enough and muddies the waters for consumers with confusing paperwork. Critics also say the rule is not as strong as the fiduciary rule, a proposal that was opposed by President Donald Trump and defeated in federal court with the help of some in the financial industry.
Firms have until June of 2020 to come into compliance with the rules.
Consumers should become more diligent about reading and understanding the paperwork they are given in the future, said Geoffrey Brown, CEO of the National Association of Personal Financial Advisors, which opposes the new regulations.
"There is a lot of confusion," Brown said. "The SEC missed a great opportunity to lessen consumer confusion about the duties of a financial professional."
Brown suspects there may be more clarification between now and 2020 as experts wade through the lengthy final rules. Some states may also take their own steps to protect consumers, Brown said.
In the meantime, Brown suggests finding an adviser affiliated with industry organizations like his own, or consider a certified financial planner who adheres to the fiduciary standard.
Follow Sarah Skidmore Sell on Twitter @sarahssell
Want to suggest a personal finance topic that Quick Fix can address? Email email@example.com.