Does your Financial Advisor Put Your Interests First?

Does you Financial Advisor Put Your Interest First?
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Fiduciary Rule Changes and How to Protect Your Bottom Line

While Trump has signed an executive order to attempt to rollback the Fiduciary Rule went into effect Friday June 9th. Will the Fiduciary rule help or pick the pockets or hard working American?

What will this mean for the millions of Americans who hold TRILLIONS of dollars in retirement accounts? What actions should you take now to make sure you are getting unbiased advice that is in your best interest? Is your financial guide a Fiduciary?

<p>Is your Financial Advisor a Real Fiduciary?</p>

Is your Financial Advisor a Real Fiduciary?


After years of work Department of Labor (DOL) finally unveiled their Fiduciary Rule last spring. It was set to go into effect Friday June 9th this year after multiple delays. By law it would mean that “Financial Advisors” (i.e. financial planners, stockbrokers, registered reps, attorneys, banks, lenders, investment hucksters, etc.) must act in their clients’ best interests and not their own, when dealing with retirement accounts only.

Given our country’s recent economic history, this was long overdue. Granted, before its passing Wall Street lobbyists were paid millions to kill the bill. This could lead one to surmise that putting the consumers’ best interest first would be bad for their profits. But really as an individual, it was a no brainer to see Fiduciary Financial Advice. Personally as a Fiduciary Certified Financial Planner, I just think working in a Fiduciary Capacity and putting my clients first is just good business. Besides, who could argue against a policy that speaks to both ethics and common sense? Yes, well, Donald Trump is who.

Speculation of More Delays?

While many old school financial professionals – who had been doing things the same way for decades were hoping (and widespread speculation in industry and mainstream press) that the White House would direct a delay of the Rule. Trumps memorandum does not provide directly for such a delay. It does, however, direct the DOL to publish for notice and comment a proposed rule rescinding or revising the Fiduciary Duty Rule. That being said it is going into effect Friday June 9th.

Financial Expert David Rae appeared on the ABC 7 Eyewitness News with Ellen Leyva and Colleen Sullivan to discuss the Fiduciary rule delay back in February.

But whether by calculation or ignorance, actual full repeal of the Fiduciary Rule hasn’t happened yet. Therefore, despite Donald Trump’s ‘delay’ of the Fiduciary Rule, as of this date and time, the rule still stands. (I myself have been an Accredited Investment Fiduciary™ for year, but new regulations have increased the record keeping requirements for all financial planners to comply with the law.)

Our phones have been ringing off the hook from investors, News outlets and retirement savers with questions on this important issue. Here are the big ones:

How do I know if my ‘financial person’ is a Fiduciary?

Those of us who are Fiduciaries are pretty proud of it and usually display the title prominently on our business cards and websites. But if you’re not sure, just ask. If your person is a Fiduciary –the answer should be a simple yes. But if they aren’t actually a Fiduciary they may try and give you some convoluted justification of why they don’t want to work in your best interests. HEAR ME NOW, if the person handling your investments is not a Fiduciary RUN, and run fast.

Professional designations are a good guide too. Look for individuals with Certified Financial Planner™ or Accredited Investment Fiduciary™ after their names. Also look for people who work with a Registered Investment Advisor (RIA) rather than a fund company or big name brokerage house blasting commercials on late night TV. Who do you think is paying for all those expensive advertisement – ultimately it is you the investor.

Where does the Fiduciary Rule stand now?

Implementation of the law has been delayed but the law won’t go away. Much of the industry has already made adjustments and incorporated the Fiduciary Rule into their policies to their customers’ benefit. Those who haven’t – because as yet it’s not an enforceable law – may seek to profit from the confusion by implying fiduciary actions but without actually living up to the standard.

You can still get Fiduciary Financial advice whether the actual “Fiduciary Rule” Law is ever implemented. The Fiduciary Standard and advice has been around for years. Many people didn’t even think to ask if their adviser was putting their interest first, or working a fiduciary financial planner for that matter.

What does the Fiduciary Rule mean for retirement savers and their investments?

The Obama administration said that unscrupulous or conflicted advice costs American savers $17 billion a year which lowers annual returns around 1% per annum or so. Proponents of the Fiduciary Rule – and count me as one – say it would help eliminate many of the conflicts of interest and incentives that lead financial advisers to peddle heavily-conflicted advice.

Others decry the lost revenue for the industry, and claim that it will limit the availability of financial advice for the smallest investors. Closer to the truth, this will make sky high commissions hard to come by for desperate salespeople. I personally would hope that you would get more value for whatever cost and expenses you are incurring to get financial or investment advice.

Bottom line, the Fiduciary Rule would benefit to investors and make fees/cost/expenses more transparent. Investors would be able to make more informed decisions and get more ongoing financial planning advice, compared to the old school transaction buying and selling of investments with no real goal or purpose.

What happens is the Fiduciary Rule is delayed or killed?

It’s not likely that the rule – or at least the thinking behind it – will be going anywhere anytime soon. That genie is already out of the bottle. Even if the Department of Labor’s Fiduciary Rule is formally repealed, the Fiduciary Standard is here to stay at some level. As I noted earlier, many firms have made adjustments to their policies and fee structures. And the number of advisors like myself who have voluntarily started working to the Fiduciary Standard has grown exponentially.

On our end this generally means instead of working on commissions, we charge a fee for financial planning advice and a percentage of assets for managing investments. I’ve spoken with some older advisors who are stubborn and don’t want to change what they have been doing for 30+ years. But as an investor or saver, if given the choice why would you knowingly work with a financial expert who doesn’t keep up to date on current policies and doesn’t have your best interest at heart?

How can investors protect themselves with or without the Fiduciary Rule?

  1. Only entrust your money to a Fiduciary. Period.
  2. Ask you financial professional to sign a Fiduciary Oath.
  3. Beware of anyone who puts a BIC (Best Interest Contract) or BICE (Best Interest Contract Exemption) in front of you without a good explanation.
  4. Look for credential like Certified Financial Planner™ (CFP®) or Accredited Investment Fiduciary™ (AIF®)
  5. Fiduciary or not, make sure your financial decisions are made as part of a comprehensive financial plan.
  6. Look for Fiduciary Financial Advice on all account not just your retirement accounts.

I’m not trying to scare anyone here (well OK, I am a little.) The old suitability standard could be better than nothing to be sure. It’s kind of like the old flip-phones; they were great at the time, but now they’re as antediluvian as a Model T and it’s more practical to have an app-intensive iPhone. When you know you can get Fiduciary advice, why would you settle for anything less?

Why I’m chose to be a Fiduciary long before the Fiduciary Rule

I’ll end on a personal note. As a long time Fiduciary Financial Planner (I became a Certified Financial Planner® in January 2006), I feel putting my clients’ best interest is just smart business. It may mean a little less money in my pocket now, but I’m building long-term relationships with my customers and I truly want to see them achieve financial independence. Sure, without regulation there’s the allure of getting a big commission before running off to hunt the next elephant. But that kind of thinking and that kind of greed pulled a worldwide catastrophe down on our heads. Today, I just don’t see it as a great business building strategy or the way to help my clients in the long term.

Setting up a secure retirement and getting your financial house in order start with working with professionals who are on your side. Whether it’s legally mandated (as of the implementation of the Fiduciary Rule) or merely smart business doesn’t matter. What matters is you pay attention and only work with those who have your best interests at heart. If you are looking for a Fiduciary Financial Planner the good news is our numbers are growing. The bad news there is still not enough of us to adequately serve each and every American on their path to financial independence.

Live for Today, Plan for Tomorrow. Your Money Matters.

DAVID RAE, CFP®, AIF® is a Los Angeles-based retirement planning specialist with DRM Wealth Management. He has been helping friends of the LGBT community reach their financial goals for over a decade. He is a regular contributor to the Advocate Magazine, Investopedia and Huffington Post as well as the author of the Financial Planner Los Angeles Blog. Follow him on Facebook, or via his website

<p>Financial Expert David Rae on the ABC 7 News with David Ono and Kathleen Sullivan</p>

Financial Expert David Rae on the ABC 7 News with David Ono and Kathleen Sullivan

ABC 7 News
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