Under President Donald Trump, financial deregulation could reshape what financial advisors disclose to clients and what products they offer, which could result in increased risk exposure, lower fees and sales prioritized over fiduciary duty.
Learn More: 4 Ways Trump’s Win Could Affect the Housing Market in 2025
Try This: 8 Common Mistakes Retirees Make With Their Social Security Checks
“While most people in finance complain about compliance and regulation, in general, the efforts have made getting good financial advice easier for consumers,” said Jay Zigmont, Ph.D., CFP, founder of Childfree Wealth. “There is a balancing act between having enough regulation to ensure safety and being overly burdensome.”
Here are five ways your financial advisor’s advice could change under Trump’s deregulations.
Trump’s deregulation of the financial sector could lead to greater access to new financial products, such as alternative investments or easier entry into less regulated markets.
“This could have the benefit of fostering more diverse portfolios,” said Christopher Stroup, founder and president at Silicon Beach Financial. “Deregulation could also lead to more aggressive retirement plans and investment strategies, which could offer higher returns, but increased risks.”
Stroup said financial deregulation could also improve credit accessibility, which benefits consumers with less traditional backgrounds.
Consider This: 9 Ways Your Estate Planning Strategy Should Change Under Trump
Brad Clark, founder and CEO of Solomon Financial, said funds normally reserved for accredited investors could be a big opportunity for the average investor.
“Regulators have made the determination that if an investor does not earn enough or have enough investible assets, they are not smart enough to invest in certain funds,” Clark said. “Most accredited investors have no better understanding of the market than the typical investor. The regulators could not be more off on this.”
In addition, Clark said there can be good reasons for consumers to invest in a financial product that offers a large upfront bonus and then slowly withdraw funds over time.
“Regulators tend to look at this as ‘churning,’ but it can be a great strategy or opportunity for clients,” Clark said.
Deregulation may make it more challenging for consumers to find good financial advice that is free of conflicts.
“For example, there has been a long-standing battle over whether everyone giving financial advice has to be a fiduciary,” Zigmont said. “A fiduciary has to put your interests ahead of their own.”
Zigmont cited the U.S. Department of Labor’s efforts, reported by Reuters, under the Biden administration to “close a loophole in fiduciary standards that didn’t apply to recommendations for purchases of non-securities, such as fixed index annuities, which insurance companies typically sell.”
According to Reuters, “Investments in such annuities are attractive to risk-averse investors and have grown rapidly but also come with higher costs. The [Biden] White House estimated the fiduciary rule could have saved retirees $5 billion a year on such investments.”
However, the insurance industry challenged the Biden-era regulations. According to Reuters, a federal judge blocked these regulations last year and sided with insurance groups, who “argued that the rule improperly treated as fiduciaries those who provide one-time recommendations to retirees, such as for rolling over investments from an ERISA plan to an individual retirement account, or IRA.”
Deregulation could weaken protections, like transparency in fees or accountability for financial products.
“To safeguard your finances, consumers should do thorough research, diversify their investments and work with fiduciary advisors who are committed to their clients’ best interests,” Stroup said.
He recommended asking potential advisors about how they’re paid — for example, if they receive commissions or are offered incentives to recommend certain products to their clients. “Seeking independent advisors and reading the fine print of your investment options can help you avoid conflicts of interest.”
Zigmont said financial deregulations could create a “buyer-beware mentality” among consumers, especially regarding the compensation structures of their financial advisors.
“Fee-only financial planners are paid only by their clients and receive no commissions or incentives to push products,” Zigmont said. “If you are getting ‘free’ financial advice, you need to know that the planner is getting paid to sell you something.”
Deregulating the banking or insurance sectors could reduce compliance costs, which could be passed on to the consumer through lower fees.
“Additionally, easier entry into fintech could provide consumers with more options, improved accessibility and reduced costs for specific financial services,” Stroup said.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
More From GOBankingRates
This article originally appeared on GOBankingRates.com: 5 Ways Your Financial Advisor’s Advice Could Change Under Trump’s Deregulations
