Score One for the Investor!

Posted in , By David Robinson

The Fiduciary Rule, a new Department of Labor (DOL) regulation, became effective on June 9, 2017. This rule obligates financial advisors to place retirement plan clients' interests ahead of their own. The fate of this new consumer protection had been unclear due to hostility from various sources. Even so, the DOL determined that it lacked legal grounds to delay the effective date of the rule.

RSWA Supports a Fiduciary Standard

You should know that we support a fiduciary standard for all advisors.  We believe that it establishes the right standard for financial advisors. How can it be debated that the clients’ interests should be placed first? Would we not expect that any professional places their clients’ interests first in giving advice? We simply do not feel that there is any meaningful argument to the contrary.

We are already fiduciaries and have always done our best to provide advice that is in our clients’ best interests. In fact, we embrace the fiduciary standard and the accompanying expectations. From this perspective, the new rule is not a game changer for us.

Subjecting all financial advisors to the fiduciary standard levels the advisory playing field. It should lead to fairer competition which should benefit both investors and advisors, who are already fiduciary advisors.

What Changes Going Forward? 

The rule phases in with some requirements effective June 9, 2017. Other parts of the rule will be effective January 1, 2018, subject to the possibility of future modifications. The rule requires that all advisors giving advice to retirement plan investors immediately adhere to “Impartial Conduct Standards.” They must also provide a fiduciary acknowledgment to current or prospective clients in plans subject to ERISA (e.g. 401K or 403B plans).

More detailed disclosures and detailed fact-finding obligations about fees and services kick in on January 1, 2018. These rules will also apply to IRAs.

Will the New Fiduciary Rule Survive Intact?

Various interest groups in the financial services industry continue to attack the rule. They argue that the rule imposes such heavy disclosure and due diligence requirements on advisors that investors will ultimately suffer. They predict that some advisors will either raise fees or decide not to serve smaller accounts.

The Trump administration is likely to back opponents of the rule and encourage modification or repeal. In fact, the appointed incoming chair of the SEC has been outspoken in his criticism of the rule.

Our prediction, for what it is worth, is that the rule will survive in some form, but the DOL will modify the rule before January 1, 2018. Will the ultimate fiduciary rule afford deserved and needed protection for retirement investors? We hope that it does.

Feel free to contact your RSWA Wealth Advisory Team if you would like more detail on the fiduciary rule or would like to discuss what it means to you, us and the industry. Feel free to forward the article to anyone who may find it helpful. 

Robinson Smith Wealth Advisors  

david-robinson

About the Author David Robinson

A wealth advisor with more than 25 years of experience in the financial field, Dave serves as Robinson Smith Wealth Advisors’ Co-Chief Investment Officer and is a Co-Managing Member of the firm. As a Certified Financial Planner® and non-practicing attorney, he provides clients with deep expertise in areas including investment management and retirement planning.
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