Lawyers are required to give advice that is in their client's best interest. The same is true for doctors and their patients. And now that rule also applies to financial advisers.
The U.S. Department of Labor announced the new "fiduciary rule" that requires financial advisers to disclose any conflicts of interest related to their investment advice.
Before the updated rule, advisers were allowed to recommend investments that earned them kickbacks without disclosing that information. That conflicted advice meant families lost an estimated $17 billion each year in their retirement savings.
"He knew that my husband was sick, and I had a mentally challenged daughter. He would have been the last person that I would have thought would have mishandled my funds. ... We had lost almost $400,000," a woman who turned to a trusted friend for financial advice said.
Advisers will still be allowed to accept commissions and bonuses, but they will be required to disclose that information to the investor. The rule goes into effect April 2017.
This video includes clips from U.S. Department of Labor.