For years, most advisors have been required to follow a simple suitability standard. This means they are only expected to make recommendations that are considered "suitable" for their clients. To put it bluntly, this allows advisors to give advice that is primarily in his or her best interest, and not the client's best interest, as long as that advice can still be technically considered "suitable."
But there's another, higher standard that some advisors hold to. It's called the fiduciary standard. Advisors who are fiduciaries must put their clients' interests before their own. Even if the advice an advisor gives is less good for the advisor, they must give it if that's what is best for the clients they serve.
In 2015, under proposed new rules by the Department of Labor, any financial advisor who provides advice pertaining to retirement savings, qualified plans, or IRAs would be classified as a fiduciary.(1) That means many advisors who previously followed the "suitability standard" had to make a major change in how they did business. However, in March 2018, the DOL fiduciary rule was vacated by the Fifth Circuit Court of Appeals. Yet, the short-lived standard spurred the industry to lower fees and prompted brokerage firms to prune their product lineups and remove conflicts of interest from their compensation structures.(2) These changes, hopefully, for the sake of investors, will outlive the rule.
So what does all of this mean for our firm? Absolutely nothing.
You see, my team and I have been following the fiduciary standard for years. We've always put our clients' interests first. There are three reasons for this. One, because we know the only way we can be successful is if our clients are successful. Second, because our greatest passion is helping people work toward their financial goals, and we believe acting as fiduciaries is the best way to do it. Third, and most importantly, we've always acted as fiduciaries because we believe it's just the right thing to do. So for us, it's business as usual. Regardless of what may or may not happen with a DOL fiduciary rule in the future, we don't expect to make any changes in how we take care of your retirement accounts, and we don't expect you to have to make any changes either.
For more information on suitability versus fiduciary standards, and for help determining if your advisor is a fiduciary, click here.
(1) Mark Cussen, "Proposed DoL Rules: How They'll Impact Financial Advisors," Investopedia, Link
(2) Barrons, "DOL Fiduciary Rule Has Changed the Game", 06.06.18