On April 8, the Department of Labor (DOL) released the final version of its long awaited fiduciary rule that applies to retirement accounts, such as 401(k)s and IRAs. The purpose of the rule is to ensure that financial advisors put their clients’ interests ahead of their own. It’s a simple concept that is just plain common sense.
A fiduciary is one who acts in utmost good faith, in a manner he or she reasonably believes to be in the best interest of the client. Financial planning clients expect their advisor to adhere to this type of standard. After all, when you are trusting someone to help you invest your assets, you expect them to put your interests before their own.
The really shocking thing has been the level of opposition to this rule by the brokerage and insurance industries. Examples of products that violate the fiduciary standard include:
- Products with large commissions that encourage advisors to sell them over lower-cost solutions.
- Proprietary products that provide on-going revenue (and often have higher fees than comparable products) to the selling company such as mutual funds from the advisor’s company.
The one thing that is surprising is this “new” fiduciary rule only applies to retirement accounts. For non-retirement accounts, there is not a requirement for many advisors to adhere to a fiduciary standard. I don’t know about you, but I would not want to work with an advisor that doesn’t have the clients’ best interests in mind when making recommendations.
As a registered investment advisor, L Squared Wealth Management has always adhered to a fiduciary standard. We treat our clients the way we would want to be treated (the Golden Rule). Examples of how we apply the fiduciary standard include:
- Advice that is in the client’s best interests, not our own
- Disclose any conflicts of interests
- No proprietary products
- No commissionable products
- Disclose how we are compensated
The DOL fiduciary rule is definitely a step in the right direction. Ask your advisor whether he or she adheres to a fiduciary standard for all investment advice. If the answer is no, then it may be time to look for an advisor that puts your interests first.
Feel free to contact us with any questions at info@L2Wealth.com.
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