President Obama recently announced a “new” ruling requiring financial advisors to put their clients’ interests above their own. Sounds like a good thing, right?

Not so fast.

“We have ongoing concerns that the Department of Labor and the White House have completely ignored the existence of the robust regulatory regime under the SEC and (Financial Industry Regulatory Authority),” said Kenneth Bentsen, president and CEO of the Securities Industry and Financial Markets Association. “This re-proposal could make it harder to save for retirement by cutting access to affordable advice and limiting options for savers.”

Obama’s “new” initiative is actually not so new. It’s a rewrite of a 2010 rewrite of the 40-year-old fiduciary rule that was eventually withdrawn in 2011 amidst industry furor. Despite the retread, something needed to be done to address the “backdoor payments” and “hidden fees” that cost Americans up to $17 billion a year in lost retirement savings, according to The Effects of Conflicted Investment Advice on Retirement Savings.

The new Department of Labor rules would require brokers to be held to a fiduciary standard, meaning that they must put their clients’ interests first. For example, given the choice between two similar funds, the broker would have to recommend the one with the lowest fees and commissions.

“Many consumers are not aware that the advisors they have hired to manage their investments are not required to act as a fiduciary,” said Mark Feldman, CEO and managing partner of Miller Russell Associates. “In other words, the advisor may not be required by law to recommend products or solutions that are in the best interest of the consumer. Many of these professionals receive commissions or fees for recommending certain products over others. The standard differs between different types of advisors (registered investment advisors vs. non-registered advisors or brokers). A suitability standard is not the same as a fiduciary standard.”

Feldman said SEC or state-registered investment advisors will see little impact even if Obama’s initiative is implements.

“These advisors have always been held to the fiduciary standard,” he said. “However, advisors of retirement accounts only, not currently registered with the SEC or state as an investment advisor, will be significantly impacted. It is not yet clear how that will look from a regulatory and accountability standpoint. We will likely see significant changes with FINRA, state departments of insurance and other organizations that provide oversight of advisors who are not currently required to act in a fiduciary capacity.”

Phil Kim, divisional vice president of AXA Advisors Southwest, said by raising the fiduciary standards by which advisors must be held accountable, Obama’s initiative will improve the profession and weed out the individuals that lack the knowledge and skills and do not place the consumers’ best interests first.

“With the implementation of this new initiative, I hope that a more open dialogue between consumers and financial advisors will be fostered,” Kim said. “Over time, I think people will start to regard professionals in our industry with the same respect as they do with their personal physicians.”

Until then, Sean McCarthy, regional chief investment officer for Wells Fargo Private Bank, said advisors should be prepared for the possibility of more stringent oversight with increased need for disclosure and heightened regulatory requirements.

“Beyond that, advisors should anticipate greater demand from clients that they clearly articulate their value,” McCarthy said. “Clients will want to understand what it is they are paying for and what they should expect from the relationship with their professional.”

While the potential impact on financial planners and financial advisors remains uncertain, the potential impact of the initiative is clear for consumers.

“Consumers should expect to see more benefits — free advice if the rule change is implemented, as well as potentially lower investment fees inside retirement accounts,” said Paul Rutkowski, managing partner, investment strategy for Nelson Financial Services.

While the impact on consumers is positive, McCarthy  said the industry must be prepared for the potential effect on profitability. He said Obama’s initiative could negatively impact income statements in two ways:

• Slower revenue growth is possible if fee transparency creates fee compression

• Expenses — in time and dollars — would be greater to comply with increased regulation

“Depending upon the severity of these implications, some participants may need to exit the industry, leaving consumers with an unfortunate and unintended consequence of less selection,” McCarthy said.

Despite the possible impact on the bottom line, most financial experts see the initiative’s silver lining.

“A uniform fiduciary standard for advisors who manage retirement accounts clearly favors the consumer,” Feldman said. “This is good.”

CHOOSING A FINANCIAL PLANNER

Here is what Valley financial experts advise consumers to think about before hiring a financial planner:

Mark Feldman, CEO and managing partner, Miller Russell Associates: “Consumers should understand the fee structure, and be aware of ‘hidden” fees.’ Ask the advisor if he/she receives fees in addition to any management fee paid by the consumer. Professionals who also receive commissions or other fees for recommending certain products have an inherent conflict of interest and the White House report released in February states that conflicted advice leads to lower investment returns.”

Phil Kim, divisional vice president, AXA Advisors Southwest: “This business is about building trustworthy relationships. Consumers can begin their due diligence by looking for a clean (Financial Industry Regulatory Authority) record, as well as the backing of a financially healthy firm. Referrals and recommendations from other trusted advisors, along with attainment of industry designations and appropriate licenses and registrations are other items to look for in a financial professional.”

Jason R. Miller, CFP, market manager, regional director, financial planning, BMO Private Bank: “While formal training is certainly not the only factor in choosing a financial provider, it is a very important one. Look for professionals who have demonstrated the appropriate level of formal training as well as a commitment to continuing education. Research and understand the requirements for the different designations and/or certifications these professionals may have. Financial matters are often complex and it is invaluable to have a knowledgeable partner on your side.”

Paul Rutkowski, managing partner, investment strategy, Nelson Financial Services: “Ask your CPA, attorney, neighbor or family member who they work with and what level of satisfaction they have with that person. Don’t be afraid to ask the tough questions about costs, the amount of risk for each strategy recommended and how advisor gets paid. Advisors should provide 100 percent full disclosure on how much they get compensated for their service.”