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We won’t settle for average. We continually seek top managers or securities and meld them into superior custom portfolios. Each palette of investments is carefully tailored to personal or family goals. We enlist excellent managers, research, resources, and effort for our clients. Don’t settle for average. You deserve excellence.
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Hint: The Fiduciary Rule is Set to Protect Investors
After a delay by the Department of Labor in calling into action a new fiduciary rule, investors need to know that it is now in effect and could affect the way they plan for retirement.
Investors currently have nearly $8 trillion in IRAs, and the new rule looks to protect that money. This almost did not come through as the new executive administration called for the Department of Labor (DOL) to review regulations and prepare an updated analysis regarding economics and legal areas surrounding this rule, which covers IRAs and 401(k)s. The administration also sought public input regarding new exemptions or changes to the regulatory portion of the rule.
However, as of June 9, 2017, the rule is in effect. So, what does this mean, exactly, for the everyday investor? First and foremost, the rule seeks to protect investors from getting conflicted advice from financial advisors. Brokers and investment advisors are now required to act as fiduciaries, putting their clients’ best interests first.
All financial advisors will be required to comply with the rule’s impartial conduct standard, which should help protect billions of dollars worth of investments. According to a 2015 report from the White House, that’s how much is at risk with conflicted advice from advisors who have something personal to gain from selling various products.
The response from the industry has been everywhere from panic to acceptance. Many firms make a lot of money off their former business model, which involved taking commissions on various products they sold to investors. For example, many have adopted new models that involve mutual funds that exclude various fees.
Does this mean that all investors are no longer going to be subjected to investment advice more motivated by profit for the advisor than for themselves? It does not. Investors need to take a little time and look into who is managing their finances. The first question they should ask of prospective advisors is if they are a fiduciary.
Ask them how they are paid for the work they do for you. Are they taking an hourly fee or just a percentage based on your overall portfolio? You need to make sure they’re not taking a commission, or you could be one of the many who are receiving conflicted advice that costs you money.
At Family Investment Center, we have operated as a fiduciary from day one. Our relationships have always been on solid footing because our clients come first, not commissions. When our clients do well, so do we. Let’s start planning your financial future in our truly commission-free and client-focused environment.
Safeguarding Investors Should be Mandatory
The Department of Labor (DOL) is taking a close look at the fiduciary rule as opposing sides are heating up their banter. On one side, people argue that the rule has prompted many frivolous lawsuits against brokers whose clients believe they breached their fiduciary duty. On the other, proponents say the rule protects investors from conflicted investment advice.
Will the increase in litigation cause the cost of advice to go up? That’s something the DOL will be looking at. Also, regulators want to look into any abuse upon sponsors of defined contribution plans.
While the rule is focused on making sure those who want to offer conflicted advice have a disincentive to do so, President Trump signed an executive order to review and perhaps rescind the fiduciary rule, which went into effect in April.
Before the rule went into effect, a financial advisor who is also a registered broker was only supposed to recommend investments that were “roughly suitable” for their clients. This means that if one fund would offer that advisor a better commission, they were more inclined to offer it to you, regardless of how it would fit your investment planning.
The rule took several years to develop, but it has some flaws, including the fact that advisors have found some ways to work around the rule. Regardless of weak areas, it’s estimated that without the rule, investors were losing close to $17 billion a year due to conflicted advice.
Some in the industry are saying the DOL will find that litigation has increased, which means it could be rescinded. Others, however, believe the DOL will recommend adjustments to the rule, not a full rescinding.
Dan Danford, founder/CEO of Family Investment Center, said as a fiduciary, he and his staff want to put all the information out that they can so their investors are safeguarded. For instance, over a 30-year period, investors seeking advice that turns out to be conflicted see a 12 percent loss in potential growth. That’s not something a fiduciary will find acceptable. Founding the Family Investment Center in 1989, Danford opened his doors as a fiduciary, which was rare at that time.
The best choice, regardless of what the DOL does or doesn’t do with the fiduciary rule, is to seek out a fee-only advisor. These are licensed professionals who don’t take commissions. Furthermore and perhaps more importantly, they’re only looking out for the best interests of their clients.
When you come to us at Family Investment Center, we’ll not only act in your best interests, we’ll walk you through everything you need to know about your specific investment planning strategy.