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These are the Questions You Need to Ask Your Advisor: #1

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questionsI’ve been writing to you for years about the difference between the fiduciary and suitability standards (Read here, here, and here for starters). A fiduciary standard requires an advisor to look out for your best interests, whereas a suitability standard does not. The first question you should ask any serious investment advisor is, “Are you required by law to follow a fiduciary standard?” Judging by this article from The Wall Street Journal, the idea is finally catching on with investors.

The Labor Department’s new fiduciary rule is set to start being implemented in April and is expected to affect more than $3 trillion of retirement assets in the U.S.; it requires financial advisers and brokers to act in the best interests of their clients when dealing with retirement accounts. It doesn’t affect nonretirement accounts.

The rule’s goal is to prevent brokers from operating under the “suitability” standard of conduct, which allows brokers to recommend investments that pay them the highest sales incentives.

Since the government cleared the fiduciary rule this past April, the concept has had something of a star turn. A number of financial-services firms have started featuring the term—or its definition—in their marketing campaigns.

The concept was the unlikely focus of an episode of HBO’s “Last Week Tonight with John Oliver,” a popular news-satire show that airs on Sundays.

“Generally, it is currently legal for financial advisers to put their own interests ahead of yours, unless—and this is interesting—they are what’s called a ‘fiduciary.’ Because not all financial advisers are bound to act in your best interest, but fiduciaries are, which is a bit weird,” Mr. Oliver explained. More than 11 million viewers have seen the episode.

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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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