Your Survival Guy

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Are You Working with a Fiduciary?

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By Feng Yu @ Adobe Stock

Are you working with a fiduciary? How would you know? You should ask. Here’s what it means to be a fiduciary from Fidelity:

The fiduciary rule is a regulation underpinning fiduciary duty, or the legal requirement for financial advisors to work in their customers’ best interest. Issued by the U.S Department of Labor, the fiduciary rule is meant to save ordinary Americans billions of dollars by regulating the types of actions fiduciaries can perform.

A fiduciary is someone tasked with overseeing someone’s asset investment. In the U.S. fiduciaries are bound by law to apply the highest standard of care to their customers, or beneficiaries, which is called fiduciary duty.

Fiduciary duty means that the financial advisor is acting in the best interest of the beneficiary: making sound investments that maximize the beneficiary’s returns instead of the financial planner’s profits.

Fiduciary duty is established by regulations issued by the U.S. government. Over the years, the government has issued new fiduciary rules to expand who falls under fiduciary duty to include various types of financial advisors, including brokers and overseers of pension plans and individual retirement accounts (IRAs).

Fiduciary rules define who is a fiduciary; not every person whose job is to give financial advice falls under the fiduciary rule. Fiduciary rules also explain what types of actions a fiduciary can take, and whether those actions might clash with his fiduciary duty, such as when there’s a conflict of interest.

In 2012, the Department of Labor released a fiduciary rule to cover how fiduciaries calculate and disclose the methodologies used in administering someone’s 401(k) retirement account. The fiduciary rule first clarified that the role of investing 401(k) assets fell under fiduciary duty, meaning that anyone who administers a 401(k) account on behalf of someone else must apply the highest standard of care.

The rule also called for increased transparency so that plan holders can make better-informed decisions about where to invest their money, and for fiduciaries to standardize the formulas they use according regulations outlined in the Employee Retirement Income Security Act (ERISA).

Action Line: When you’re ready to work with a fiduciary, I’m here. In the meantime, click here to subscribe to my free monthly Survive & Thrive letter.

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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 (RIP JB) 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.

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