Monday Morning Quarter-Buck 06-12-2017 - New Fiduciary Rule

Monday Morning Quarter-Buck

 Amy’s Blog

 “With the new day comes new strength and new thoughts.”  Eleanor Roosevelt

 It’s here, it’s finally here!  As you all enjoyed a wonderful Friday looking forward to the weekend, I quietly celebrated the fact that all advisors must now act as a fiduciary when dealing with your retirement accounts!  Notice, I mentioned retirement accounts only?  That’s right, there are now two sets of rules for some advisors.

 Why am I so excited about this rule?  So many times I’ve heard people say to me, “why would I pay you a fee for financial advice, I’m getting it for free now.”  Really?  That other advisor is that  generous?  No, you may not be seeing the fee, but you are paying it either through commissions or wrap accounts.  So this rule opens up the opportunity to actually compare apples to apples when hiring an advisor, at least regarding their cost.

 I read an article written by John Drachman (I also posted it to Facebook, LinkedIn and Twitter), that I loved.  He wrote, “If you weren’t always acting in my best interest, whose best interest were you acting in?”  He suggested asking your financial advisor that question, along with four more:

  •  As my financial advisor, will you do your best to evaluate my long-term goals and recommend investment ideas to help me achieve them?
  • In the course of our business relationship and because there are times when you may buy and sell investments for my portfolio, what is the range of fees and commissions you might receive?

  • Do you promise to act in my best interest on all matters related to advice and investment recommendations for my retirement portfolio?

  • Do you or your firm have any potential conflicts of interest with decisions you might make on my behalf?

Now, as a fiduciary for all accounts, I’m completely biased on this topic!  I think this is a first step towards better consumer disclosure, but what about the non-retirement accounts?  When will the rule cover those?  My hope is that like Australia and Europe, the US will make all advisors a fiduciary soon.  The way I look at it is, if you can’t take the heat, get out of the kitchen.  The critics have said it will reduce services to the smaller investor, I think Vanguard would disagree - most of their funds require $3,000, I think many “small” investors can save up to make that type of investment and continue making systematic contributions of any size thereafter.  In fact, Bill McNabb, Chairman and CEO of Vanguard, wrote an article back in April whereby he stated, “This rule has been years in the making and will fundamentally shape the availability and quality of investment advice. Clarity, certainty, and consistency are required if investors are going to benefit from the trusted advice that can mean the difference between meeting financial goals and falling short. Vanguard has been a vocal advocate for a fiduciary standard and will continue to fight for a well-crafted regulation that puts investors’ needs first.”

Don’t get me wrong, it does add additional paperwork and formal disclosures to advice that we give to clients, but I honestly don’t look at that as a bad thing - but more of a conversation piece that all parties sign off on.

There is no doubt you may read about this regulation in a financial or trade magazine, so if you have any questions, don’t hesitate to ask questions.  After all, in the words of President John F. Kennedy,  “The goal of education is the advancement of knowledge and the dissemination of truth.”

As some of you may know, I work with Fiscal Fitness Clubs as a coach and educator in addition to delivering services through Irvine Wealth Planning Strategies.  We are excited to have a new class starting soon - Adulting Class for Young Adults.  For additional information - click here: FULL CLASS DETAILS HERE

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