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If you haven鈥檛 already, expect to hear from your financial advisor soon about a great new investment opportunity for your IRA.

The reason: There鈥檚 a loophole in a聽strict new rule that requires advisors to act in their clients鈥� best interests when counseling them about retirement funds. That loophole allows advisors to continue lining their pockets at the expense of yours until the federal rule takes effect April 10, 2017, and even beyond.

鈥淭here鈥檚 a grandfather clause,鈥� explains Barbara Roper, director of consumer protection for the Consumer Federation of America. 鈥淧eople need to be watching out for advisors who are trying to earn last-minute excess profits before the rule goes into effect.鈥�

Not all advisors are out to get you, of course. But enough of them are taking advantage of small investors that the聽Department of Labor finally has called foul.

The department鈥檚 so-called 鈥溾�� holds advisors to a much higher standard when their advice pertains to a workplace retirement plan or an IRA. The rule doesn鈥檛 prohibit advisors from earning commissions on their investment recommendations, but it does require them to disclose their conflicts of interest and charge 鈥渙nly reasonable compensation鈥� while forbidding financial incentives that encourage advisors to act contrary to their clients鈥� best interests. Clients will have to sign this 鈥渂est interests contract exemption鈥� and can sue their advisors in court if they believe their interests haven鈥檛 been properly served.

The fallout will be huge

Among the many consequences, expect that:

Annuity sales will drop.聽It鈥檚 going to become a lot harder for an advisor to justify recommending high-cost, high-commission products such as variable annuities and indexed annuities for your retirement plan. The primary advantage of annuities is tax deferral, and you鈥檝e already got that in your IRA and 401(k). It鈥檚 pretty clear who鈥檚 benefiting from these recommendations 鈥� and it鈥檚 not you.

Rollovers will be trickier.聽Advisors are often eager to get their hands on 401(k) money and they promote rollovers into IRAs as a way to get at it. Once the new rule is in effect, advisors will have to explain why you鈥檙e better off in a higher-cost retail IRA than you were in your lower-cost, institutional 401(k).

鈥淚ncentives鈥� are on the endangered species list. 聽Annuity providers have long proffered bonuses, prizes and other inducements, including trips to luxury resorts on tropical islands, something known as 鈥渋ncentive travel,鈥� to advisors who push their products. The effect of the Labor聽rule is expected to be so significant that two industry groups, the Financial & Insurance Conference Planners and the Society for Incentive Travel Excellence,聽warning meeting planners to brace for its impact.

You鈥檙e not out of the woods

Elimination of these obvious conflicts of interest is good, but there still are many substantial threats to your financial well-being. Among them:

The rule doesn鈥檛 apply to nonretirement accounts.聽Your advisor can continue to sell you expensive or poorly performing investments for your brokerage account or your kids鈥� college funds even though better, cheaper ones are available 鈥� just because the advisor gets paid more to push the inferior versions. Advisors get away with this on nonretirement accounts because instead of being held to a fiduciary standard, they鈥檙e covered by the much lower 鈥渟uitability standard,鈥� which only requires the advisor to 鈥渉ave a reasonable basis for believing the recommendation is suitable for you,鈥� according to the Securities and Exchange Commission.

Wall Street is still fighting the new rule.聽The U.S. House of Representatives voted in April to block the rule, but Republicans failed to gain enough support to override a sure presidential veto. Now, financial industry groups and the U.S. Chamber of Commerce have filed a lawsuit challenging the fiduciary standard. The Department of Labor says it鈥檚 confident the rule can withstand any legal challenges, but it鈥檚 possible the battle could delay implementation.

Financial firms still will try to justify the unjustifiable.聽Some companies will seek ways around the rule so they can continue to push 鈥渉igh-commission garbage鈥� on their unsuspecting customers, says Bob Veres, publisher of the financial planning trade publication Inside Information. Investor lawsuits eventually will bring that behavior to a halt, since 鈥渢he whole enforcement mechanism is the court system,鈥� Veres says.

鈥淥ne of the things that scares the brokerage firms and independent broker-dealers is the fact that they aren鈥檛 going to be dealing with regulators, who they can slyly promise a nice, lucrative post-DOL employment career if they 鈥榩lay ball,鈥欌�� Veres says.

Even with the new rule in place, your advisor could be a skunk.聽The suitability standard isn鈥檛 that hard to meet, and yet many advisors couldn鈥檛 even manage that. More than 7% of advisors overall and up to 20% at some big firms have been disciplined for misconduct or fraud, according to a working paper by researchers at the University of Chicago and the University of Minnesota who studied 10 years of records from BrokerCheck, a financial advisor database. The advisors were disciplined for unsuitable investments, unauthorized activity, omission of key facts, fraud, negligence, misrepresentations and excessive trading.

The researchers allege that some firms 鈥渟pecialize in misconduct鈥� by tolerating bad behavior and hiring advisors with spotty records. Most of those disciplined either kept their jobs or promptly were hired by another firm.

How to find a good advisor

You might conclude, as many others have, that you鈥檙e better off avoiding financial advisors entirely. You鈥檙e not.

The best advisors can save you time and money, protect you from threats to your wealth and get you to your goals a lot faster. A really good financial planner is especially important in the five years before and after retirement, when you鈥檒l be making a lot of decisions that can鈥檛 be reversed. These choices can spell the difference between a comfortable retirement and running out of assets before you run out of breath.

So how do you make sure you have one of the good ones? These tests can help:

Your advisor has聽earned a CFP or a PFS credential.聽Certified Financial Planners and CPA-Personal Financial Specialists have to take comprehensive financial planning coursework, pass a rigorous test and agree to certain ethical standards, including acting as a fiduciary when advising you about financial planning. Advisors without comprehensive financial planning credentials don鈥檛 know what they don鈥檛 know, which makes them a potential menace to your financial life. (You can check credentials with the聽, the聽听辞谤听.)

Your advisor will聽sign the fiduciary oath.聽, created by a group of financial planners promoting the standard, spells out that your advisor is committed to putting your best interests ahead of his own. It鈥檚 simple, it鈥檚 straightforward and if he balks, you鈥檝e learned all you need to know about whose side he鈥檚 on.

You鈥檝e done a background check.聽You don鈥檛 get to skate on聽. Not all bad actors have a checkered history 鈥� witness former investment advisor and fraudster Bernie Madoff 鈥� but there鈥檚 no excuse for hiring someone who鈥檚 already screwed over previous customers, however charming or highly recommended he or she may be. There are too many other good, honest advisors out there to entrust your savings to someone with a history of misconduct.

Your advisor鈥檚 not human.聽The Department of Labor pointed to robo-advisors as a low-cost source of fiduciary advice for small investors 鈥� and for good reason.聽聽such as Betterment and Wealthfront use computer algorithms and dirt-cheap exchange-traded funds to manage your investments for a fraction of what a human advisor would cost. The services typically cost between 0.3% and 0.5% of the amount you invest, a charge that includes the expense ratios of the underlying funds. Contrast that with聽human advisors who may charge 1%, on top of the 1% or more cost of the underlying investments.

Some robo-advisors take a cyborg approach, combining computerized portfolios with phone and email access to a human advisor. Even when a human is involved, though, the services are committed to a fiduciary standard of care to put your best interests first.

Not all robo-advisors are conflict-free. Some, including Schwab Intelligent Portfolios and Blackrock鈥檚 FutureAdvisor, use proprietary products that could run afoul of the new Department of Labor rules, says financial planner Michael Kitces, who blogs at Nerd鈥檚 Eye View.

Still, we鈥檙e typically talking about fee differentials measured in tenths or even hundredths of a percent. That鈥檚 a far cry from the 5% commissions and 20% surrender charges that plague investments sold by nonfiduciary advisors.

And no one will ever offer a trip to a luxury resort to a computer as an incentive to tilt the portfolio their way.

Liz Weston is a columnist at NerdWallet, a personal finance website, and author of 鈥淵our Credit Score.鈥� Email:聽lweston@nerdwallet.com. Twitter:聽.

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