Right now, politics seem to have entered every public conversation. The rhetoric has reached new lows while politicians and political pundits do their best to raise the hysteria. It’s enough to make you want to reach for the oxygen tank or the martini glass.
But lost in all the political screaming is the very real issue of the Fiduciary Standard for Financial Advice. The Department of Labor wants to extend the fiduciary standard for retirement plans under the Employee Retirement Security Act of 1974, which is even more stringent that the requirement imposed for Investment Advisors by the US Securities and Exchange Commission.
The plan—which has been in various stages of discussion and negotiation for over five years—would require brokers (think wirehouse folk) to act as fiduciaries. To act as a fiduciary means you must act in the clients’ best interest vs the current suitability standard. Suitability means the investment must suit the buyer, without it having to be in their best interest.
Meanwhile, a House committee has approved a bill that would require the DOL to get approval from Congress before the new rules can be enacted. As the bill moves forward to the House Ways and Means Committee, investors continue to be at the mercy of product-pedaling brokers plying their trade. It seems that our politicians are much more motivated to protect Wall Street rather than the constituents they serve.
Why would anyone stand in the way of rules that require an advisor to act in their clients’ best interest? It’s enough to rattle the brain. That is, until you see who is delaying and blocking these rules—and why.
When you hear a candidate for office saying that the system is rigged, you’d better believe it. Otherwise, the DOL Fiduciary Standard rules would have been put in place years ago!
The DOL regulations represent a tough standard for financial advisors giving advice on retirement assets. The result? Finger pointing and criticism coming from legislators, Wall Street and other brokers whose business would be “adversely affected” by the rules.
Regardless of whether or when the DOL rules are enacted or who wins out on which Fiduciary standard is appropriate and sufficient, working with an advisor who is completely transparent HAS to make more sense than hoping your broker/advisor is recommending the right product.
The politics of Financial Advice looks to continue into the foreseeable future, but that doesn’t mean you have to wait to work with an advisor who is responsible, ethical, transparent and acts in your best interest. There are planners all over the country who work this way. Take a walk on the NAPFA (National Association of Personal Financial Advisors) website, www.napfa.org. There you will find the fee-only folks who have signed on to the Fiduciary Standard and are committed to transparency.
The backroom deals will be done, the stalling and smoke screens that are meant to protect the interests of the very powerful will continue; but that doesn’t mean you have to support their schemes. Your financial success and security depend on it.