The Wall Street Journal Reported on Friday that Edward Jones will stop offering mutual funds and exchange-traded funds that charge investors a commission. Even if clients feel that these products are best for their retirement plans, due to the onset of new Fiduciary rules, Edward Jones and a growing list of other brokerage firms do not want to face the threat of legal action from the government or clients.
While most self-directed IRA holders prefer to hold non-publicly traded offerings, the fact that an entire segment of investment choices will become unavailable to IRA holders is troubling. The new fiduciary rules were enacted to protect the public and their retirement plans from the perceived risk of financial advisors who may recommend investments that may provide the advisor a higher commission – while accruing no additional to the IRA holder. While the protection is laudatory, there is a cost to the increased regulation to some investors.
If IRA clients want to access investments with higher commissions, they likely will need to switch from a commission based structure, to a fee-based model, requiring the client to pay fees based on account balances. To some clients, this fee based option could be more costly, especially for those who do not trade much.
While the new fiduciary rules do not effect our clients that hold self-directed IRAs, any regulations that reduce access to investments for the informed client should be greeted with healthy skepticism.
Written by: Glen Mather
President & CEO of NuView IRA
