The Department of Labor held a press conference today discussing their revisions to the “Fiduciary Rule” that was proposed last year. The rules govern the way financial professionals handle the world of retirement investing. And that’s a big world – IRAs accounted for $7.3 trillion and 401(k)-type plans held $6.7 trillion at the end of 2015, according to the Investment Company Institute.
The new rules require financial professionals to act as fiduciaries – which just means their advice must put their client’s interest first. Isn’t it already that way? And is the industry really in a frenzy over this?
Good questions – No and Yes.
Many financial professionals are held to a “suitability” standard, that’s a much different standard than a fiduciary standard. You mean my broker may give me advice that’s not in my best interest? Yes. Conflicts of interest are a real thing! Why else would there be so much complexity built into an industry where simplicity is key?
The reason for the frenzy is simple, this change will impact the business models of many financial professionals. It will be interesting to watch how the industry adapts (or tries to reject the rules altogether). The good news is, there are plenty financial professionals that are already held to this standard, fee only professionals being a big and growing group that falls into that category. If you work with a fee only professional (Aptus Captial Adivosrs is fee only), good for you, nothing changes.
I will avoid the left and right wing arguments and say this – this rule is a move in the right direction for the industry overall IF it’s implemented and enforced effectively. I’m well aware, that’s a big if. Here is a great article from the times if you would like a more detailed take on things: Link HERE.
This is a major deal, I’m sure I’ll have more thoughts once I can digest the changes announced today.