Failed Fiduciary Rule Spells Caution for You

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Time and time again the leadership at big brokerage houses and insurance companies seem to have their own best interests in mind rather than their clients’.

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They allow their army of salesmen to prey upon the public, cloaked in fancy names such as Advisor with an “O”, Sr. VPs, and/or you fill in the blank with an “important title” while following a less strict “suitability” rule. I have explained the benefits of the fiduciary rule to readers before. See here, here, and here for an introduction to the idea.

Like clockwork they fail to look out for those they’re supposed to serve, YOU, the client. I have always favored a Fiduciary Rule for the above crowd. A suitability rule has the backbone of a wet noodle. Those who follow it don’t necessarily have to act in a manner that is best for the investor/client. It’s not some made up title. You’d be wise to begin your search for investment counsel by asking this question: “Are you required to follow a Fiduciary Rule or just what’s suitable (to them I might add)?”

Lisa Beilfuss explains the death of the Fiduciary Rule at The Wall Street Journal:

Financial pros can go by a number of titles: There is wealth manager, financial planner, broker, financial adviser—as well as “advisor” with an “o”—and more. The difference is sometimes semantics, but it is often much more.

For one, financial advisers, regulated by the SEC, have for decades been held to a fiduciary standard, meaning they have to put clients’ interests before their own. The requirement traces back to the stock-market crash of 1929 and subsequent Depression, which Congress in part blamed on abuses in the securities industry.

Brokers are regulated by the Financial Industry Regulatory Authority, or Finra, the securities industry’s self-regulatory body. They must provide what the agency describes as “suitable” investment advice—short of the fiduciary care required of their adviser counterparts.

Where things get tricky is that some financial professionals are dually registered, and some have professional designations that carry requirements trumping the standards required by regulators. For example, a broker who’s also a certified financial planner has to serve as a fiduciary, when doing financial planning, to maintain the designation.

The best way to know whether your adviser is a registered investment adviser, broker or both is to search BrokerCheck, a database maintained by Finra. An individual’s profile will denote his or her title and regulatory overseer.

But industry professionals and consumer advocates say investors should confirm any information with their adviser. Even better, the experts say: Investors should ask a financial professional to put in writing whether he or she is a fiduciary in their particular relationship.

E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.