To Halt or Not to Halt? The Fiduciary Rule Is the Question

At last week’s TD Ameritrade conference, the halls were abuzz with news that an executive order signed by President Trump on February 3, 2017, would halt implementation of the Department of Labor’s fiduciary rule. This became a major topic of discussion at the conference, since eliminating this regulation, scheduled for implementation beginning in April 2017, has been a cherished goal of many large financial firms that are in the business of providing advice to people with IRAs and other retirement investment accounts.20170206 Fiduciary

Simply put, the fiduciary rule would require any financial professional who provides investment or retirement planning advice to people with retirement accounts to be held to the fiduciary standard, which requires such advisors to always act “in the client’s best interest.” That sounds perfectly reasonable, right? Wouldn’t you want anyone who is handling your retirement investments to be required to act in your best interest?

But here’s the rub: Many advisors who work for brokerage firms or insurance companies–the majority of whom are compensated by collecting commissions on the products they sell and charging fees–are not presently required to meet this standard. Instead, the existing standard for such advisors is that the products they recommend for their clients must be “suitable.” This is not the same as requiring that advice always be in the client’s best interest. Perhaps it’s not surprising, then, that when the fiduciary rule was proposed, many segments of the financial industry–including many of the largest firms on Wall Street–complained loudly and bitterly about the extra levels of regulation that would be imposed, the expense of compliance, and even the harm that might be done to smaller investors because of reduced access to professional investment advice.

It is not completely clear that President Trump’s executive order will halt implementation of the fiduciary rule. According to Skip Schweiss, Managing Director for Advisor Advocacy and Industry Affairs for TD Ameritrade Institutional, the order actually calls only for delaying the phased-in implementation of the rule for 180 days, to allow time for further study and “economic and legal analysis” by the Department of Labor. Nevertheless, in the opinion of many observers, the president’s announced goal of rolling back regulation in the financial industry encourages the view of the ultimate demise of the fiduciary rule.

The most important point in all of this–and a point that bears directly on Bernhardt Wealth Management–is that, because we are a Registered Investment Advisory firm, it makes no difference to us whether the rule is implemented or not. Why? Because we have always been and will always be subject to the rule’s requirement to act in our client’s best interest. We think it is vitally important for any investor to work with a fiduciary, and it is absolutely essential to us that we do what is right for our clients 100 percent of the time. We don’t need a government regulation to tell us to do the right thing; it is part of our culture and why we exist to serve our clients.

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