In February of 2015, President Obama called on the Department of Labor (DOL) to update the rules and requirements that retirement advisors put the best interests of their clients above their own financial interests. It wasn’t a new request from the White House. The DOL had released a proposal in 2010 that was met with intense criticism resulting in the DOL withdrawing their initial proposal. Six years later, we have a new rule that is over 1,000 pages in length and continues to spark controversy. Here are a few of the main objectives of the rule and how we feel about them.
- The best interest of the client should come above the financial interest of an advisor. We agree! Since when was it okay for advisors to not put their clients’ best interests first…NEVER. We agree that if you seek financial advice…just like any professional advice…that advice should be given with your best interest in mind. Isn’t this what you expect when seeking professional advice in any area?Would you want a doctor to recommend surgery when it’s not in your best interest? Would you want a repair man to replace a part when it’s not necessary? Financial advisors should always provide advice in the best interest of their clients! This new rule does not cause us concern or change our practice. We’ve been operating as fiduciaries for years, focused on serving our clients’ needs first and foremost.
- “Order-taking” does not place the advisor in a fiduciary role. We agree! If a client is working with an advisor solely to have him or her place a trade or process a transaction for them, that advisor is not a “fiduciary.” We are not interested in these types of advisor/client relationships. We prefer to serve as a fiduciary to those who are planning for retirement because our expertise is not in placing trades or processing transactions, but in our ability to evaluate each client’s unique circumstances and provide valuable, educated, insightful recommendations. We prefer the fiduciary role.
- Any advisor recommending a rollover that results in an increase in fees will be subject to the Best Interest Contract Exemption. We agree! If we recommend a rollover, and that rollover results in an increased fee, it’s because we believe the rollover option is in your best interest. Maybe in your current plan you don’t have access to advice, advice that considers your entire financial picture, not just one account. Or maybe the current retirement account does not offer the breadth and depth of investments as another. Whatever the reason, if we recommend a rollover, it’s because we believe it’s in your best interest.
The DOL’s new rule starts to go into effect in April of 2017 and will be fully implemented by January 2018. While the new rule is complex and requires our industry to implement many changes, we don’t see this an obstacle to our continued commitment to our clients. We actually look forward to the changes and any new ways of doing business this new rule brings.
Securities and advisory services offered through LPL Financial, a registered investment advisor, member FINRA/SIPC.