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Friday Financial Five – April 8, 2016

Friday, April 08, 2016

 

DOL fiduciary ruling at last

The Department of Labor has finally made the fiduciary standard the law of the land for financial advice. While it may seem natural to assume financial advisers are working in their clients’ best interest, the amount of time it took for DOL’s ruling indicates otherwise. Effective January 2018, financial professionals must act in their clients’ best interest. While technically only referring to retirement accounts, it is expected that this will be the standard across the wealth management landscape. 

Savings attributed to the fiduciary ruling

A hugely important factor in the DOL ruling is the expense the government felt could be curtailed by applying the fiduciary standard industry-wide. The department anticipates IRA holders will gain over $30 billion over the next decade thanks to the implementation rule. On the flip side, the added costs for companies to comply with the rule will amount to between $10 and $31 billion over the next ten years. 

Court finds Metlife is not too big to fail

A judge has overturned the government’s assessment that Metlife is a systemically important financial institution. Being labeled “too big to fail”, which leads to more stringent capital requirements, had Met looking at separating different lines of business. In the court process, Metlife argued that the methodology used by the Financial Stability Oversight Committee (FSOC) was not prudent and the judge agreed that the government’s ruling was “arbitrary and capricious”. The FSOC will appeal the ruling and it remains to be seen if other insurance companies, including AIG and Prudential, will go down the same path.

Ranking states’ financial literacy

People are trying to get more familiar with money, borrowing, credit, and investing. Wallethub’s  2016 list ranking states in terms of financial literacy indicates there’s still room for improvement, as twenty percent of respondents still spend more than they make. New Hampshire grabs the top spot thanks to a number one ranking in planning and daily habits, while Massachusetts dropped to thirty-five and Rhode Island ranked forty-second.

Over 40% of student borrowers aren’t paying

The trillion dollars outstanding in student loans is an issue, especially with the continued delinquency on the payment for this debt. Courtesy of the Wall Street Journal, over 40% of government backed loan borrowers aren’t paying or are late on their payment. This number doesn’t include the huge surge in borrowers that enrolled in a distressed repayment plan. In all, the total amount of borrowed dollars in delinquency is over $200 billion.

 

Dan Forbes, a CFP Board Ambassador, is a regular contributor on financial issues. He leads the firm Forbes Financial Planning, Inc in East Greenwich, RI and can be reached at [email protected]

 

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Massachusetts has 2015's 28th highest insurance premium penalties for high risk drivers, according to a WalletHub report. 

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The Pew Charitable Trusts

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