On April 6th, 2016 the Department of Labor issued what is known as “the fiduciary rule” which states that financial advisors, brokers and others who help clients manage their 401(k) and IRA assets must always act in their clients’ best interest.
There is not enough space on this blog (or probably in my lifetime) to fully dissect and properly analyze the 1,000+ page ruling that was recently released. I will let the financial media, the industry trade press, Congress, the courts, and the various regulatory bodies that oversee the financial services industry do that.
What I want to do here is share a couple things about the new rule that you need to know.
First, I already am a fiduciary.
Financial Engines recently reported the following statistics: 66% of Americans don’t know the difference between a financial advisor who is a fiduciary and one who is not, and 41% don’t know if their advisor is a fiduciary.
Let me fill you in.
A fiduciary is a financial advisor that is required to put his clients’ interests before his own and without regard to the advisor’s financial compensation. Advisors who are not fiduciaries were previously only required to make investments that were deemed “suitable”.
In case you are one of the 41% who may not know, I am a fiduciary. As a fee-based advisor I am already held to the industry’s highest standard – the fiduciary standard.
If you have accounts with me that are billed a quarterly asset management fee through Charles Schwab or Royal Alliance/Pershing, I am a fiduciary and have been during the entire time you have had your accounts with me.
For me that’s not hard. Frankly, I believe putting clients’ interests first is not only the right thing to do but also the smart thing to do.
Second, my status as a CERTIFIED FINANCIAL PLANNER™ requires me to put your interests first at all times. Even if you are not in a fee-based, retirement account.
As a CFP® certificant I am not only held to the “fiduciary standard of care”, but also to the high ethical standards of the CFP Board. Principals such as integrity, fairness, objectivity, competence, confidentiality, professionalism and diligence are just an everyday part of the job.
The CFP rules of conduct apply to all CFP®s regardless of the products they recommend, how they get paid or whether the account is an IRA or not.
You can read more about this on the CFP Board website or by clicking here.
What this means for you. The new fiduciary rule is a big deal for the industry. But it’s really not a big deal for me or my clients.
You can continue to rest assured that your advisor always has had and will continue to have your best interest at heart.