The DoL’s Fiduciary Rule: A Step in the Right Direction

When the Department of Labor (DoL) finalized its fiduciary rule last week, it seems there was something for everybody. As of January 2018, all financial advisors will be required to act in their client’s best interest when giving retirement investment DOL_Sign and Rulesadvice. Obviously, as someone who has always operated under the fiduciary code of conduct, I applaud the DoL for championing consumers’ rights.

However, as I continue to set my firm apart, I will note that the rest of our industry has until January of 2018 to adopt an approach that nobody can argue isn’t 100% in investors’ best interests. The delayed implementation is a major compromise put in place to appease the brokerage industry that fought so hard against the fiduciary rule. Also, I must stress that this DoL ruling applies only to retirement advice.

To put the more than 1,000 pages in a nutshell, the great news is that once commission-based sales forces will need to establish fee-compensated registered investment advisors (RIAs) to work with qualified plans. The bad news is that same salesperson can still sell an IRA rollover from that same qualified plan and place it into commissionable products. Talk about concessions! We all know the cost of investments can take a bite out of total returns. So, why is it that the DoL rule allows advisors to keep recommending proprietary products and variable annuities for that matter that have the highest commission products in the business? That is something a full-time (not a part-time) fiduciary would never do!

Going forward, I believe all the press about the DoL ruling (and any resulting lawsuits) is likely to shine a bright light on how the brokerage industry has always taken advantage of consumers, making money on their backs. Yes, this ruling is a major milestone for our industry, but there is still work to do.

While the DoL’s 1,000 pages have moved us forward, really, the Committee for the Fiduciary Standard’s Fiduciary Oath summarizes the protections that should be afforded to all investors in just 63 words. We at Bernhardt Wealth Management have and always will commit to these five principles. And you should ask any advisor you work with to sign this fiduciary pledge:

  •  I will always put your best interests first.
  • I will act with prudence; that is, with the skill, care, diligence, and good judgment of a professional.
  • I will not mislead you, and I will provide conspicuous, full and fair disclosure of all important facts.
  • I will avoid conflicts of interest.
  • I will fully disclose and fairly manage, in your favor, any unavoidable conflicts.

I will continue to report on the DoL ruling and how the industry reacts, so stay tuned

Leave a Reply

Your email address will not be published. Required fields are marked *