Opinion: Point – Fiduciary Rule Protects Investors
We’ve all seen the commercials — your retirement advisor will come to your daughter’s wedding, will help you reach your goals, will guide you on the path to the American Dream. You just have to do the right thing and invest money for your retirement.
The reality is much darker. That fatherly retirement advisor actually has no obligation to give you advice that benefits you. In fact, he usually has incentives to sell you whatever product his brokerage firm or bank is pushing that day. The “advisor” who comes to your daughter’s wedding is actually a salesman — a really, really good salesman.
Don’t just take my word for it. While big banks and brokerage firms call these employees “advisors” on the TV commercials, in court they claim the “advisor” is only “an agent who receives a commission on the sale of a product and is not paid for rendering investment advice. She is paid for affecting the sale.”
This is financial industry double-talk that makes no sense to hardworking Americans and undermines their trust.
Recently, the U.S. Department of Labor (DOL) cracked down on this kind of deception. Late last year, the DOL created the commonsense “fiduciary duty rule:” If you are advising savers on retirement products, you have to put their interests first.
Registered Investment Advisor firms and Certified Financial Planners already hold themselves to the higher standard of the fiduciary duty rule. All savers should ask their financial advisor if they are held to a fiduciary standard at all times in all transactions. If they are not, consider a new advisor. It can save you thousands of dollars or more.
I wish the DOL rule was the end of the story and that all financial “advisors” were being held to the higher standard. Sadly, President Trump signed an executive order Feb. 3 to effectively kill the rule.
The financial industrial lobbyists are thrilled. Why? It’s all about the money: $17 billion a year, conservatively. That’s the profit the White House Council of Economic Advisers estimates big banks and brokerage firms make from providing retirement advice.
The council also found that “a typical worker who receives conflicted advice when rolling over a 401(k) balance to an IRA at age 45 will lose an estimated 17 percent from her account by age 65. In other words, if a worker has $100,000 in retirement savings at age 45, without conflicted advice it would grow to an estimated $216,000 by age 65 adjusted for inflation, but if she receives conflicted advice it would grow to $179,000—a loss of $37,000 or 17 percent.”
How does the financial industry justify their stance? They say the fiduciary duty rule would make it less profitable to give “financial advice” and therefore the investors with smaller retirement accounts would not have access to “advice” because it does not make business sense.
In other words, they are concerned the small savers will not be served. However, if “advisors” are concerned about a small — or any — saver, they wouldn’t give advice not in his or her best interest.
It is easy to ignore the cacophony that is coming out of Washington, D.C. these days, but ignoring the importance of good retirement advice puts your hard-earned dollars at risk. Killing the fiduciary duty rule only makes sense to those who are looking to make money off of your future.
Kimberly L. Curtis is president and CEO of Wealth Legacy Institute, a fee-only wealth management firm in Denver. She can be reached at xxx xxx xxxx or via email at firstname.lastname@example.org.
As a lobbyist, Katie had Americans for Financial Reform as a client. One of its goals was to preserve the Department of Labor “fiduciary rule.” Katie wrote this piece in the voice of financial advisor who was an ally on the issue. The op-ed was published in the Denver Business Journal on March 3, 2017.