The financial advisor industry is buzzing over the United States Court of Appeals for the Fifth Circuit’s recent decision vacating the Department of Labor’s fiduciary rule.
Word on the Street is this decision could jeopardize the future of the rule, which attempts to mandate that advisors dealing with investors’ retirement accounts put their clients’ best interest ahead of their own financial gains.
Again: so what?
In a perfect world, the law would hold brokers and financial advisors accountable for acting in their clients’ best interests, the same way it does for doctors, lawyers and accountants bound by a fiduciary duty to clients. But long before this rejection of the DOL fiduciary rule in court, corporate influences with an economic interest in opposing the new rule lobbied to water it down beyond the point of truly protecting investors.
Rule or no rule, the writing is on the wall: the fee-based financial advisory market nearly doubled to $9 trillion in the six years ending in 2016, according to Cerulli Associates. They predict it will grow to nearly $13 trillion by 2019.
Savvy clients are rejecting the conflicted commission-based financial advice model and demanding their advisors be fiduciaries—whether the government mandates it or not.
The DOL rule isn’t dead yet—some onlookers believe it could be headed for a debate in the Supreme Court. And there is likely a proposal forthcoming from the SEC to “bring clarity and harmony to the investment advisor, broker-dealer standard of conduct regulation.”
At the end of the day, advisors who do not uphold a fiduciary duty should be prepared for clients to question their compensation models. And anyone who asks an advisor if he or she is a fiduciary and does not hear an unqualified “yes” should seriously consider finding one who is.
In other words: stop asking your butcher for nutrition advice.
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