They say you can't fight city hall. Those who have tried quickly learn that the ones you are fighting are also the ones who make the rules. Not surprisingly, the rules always favor them.
So it has been since 2010 when government regulators sought to take control of our retirement accounts in what became known as the Department of Labor (DOL) Fiduciary Ruling. Like most government actions, it began with good intent; a desire to require financial advisors (FA) to act in their clients’ best interests. Investors would be surprised to learn that under current regulations most advisors are only required to offer their clients investments that are considered “suitable.” The difference between the two standards is confusing, but significant. A comparison might be a car buyer being sold an expensive vehicle they don’t want or need, but would still be considered legally “suitable” for a person looking for transportation. Or perhaps they wanted a Toyota but were sold a Yugo. It could be argued both are “suitable” vehicles, but most would not consider a Yugo to be in their long term best interest. The lower bar of “suitability” has resulted in many investors being sold products that are technically “suitable” but not in their best interests.
As a CFP® professional, I have always been required to act in the best interests of my clients, so I strongly support a uniform Fiduciary standard. Unfortunately, as the debate progressed, aggressive government officials added a mountain of additional rules that would have stripped investors of their rights to invest their money as they pleased. These many additions turned a good idea into very bad public policy. I have written and spoken much on the topic and pleaded, along with many others, for individuals to let their voices be heard in opposition to the regulatory monster that was being created, though I had little hope government would listen. Despite enormous opposition, the DOL pressed forward, claiming executive authority from the 1974 ERISA act.
This week when the ruling was released, the industry was shocked to hear the DOL had backed down. Rather than exercising substantial control over all retirement accounts as they had threatened, they reverted back to the initial goal of requiring all FAs to act in the best interests of their clients. As a note of clarification, this new ruling only affects retirement accounts so investors should be aware that in their non-qualified accounts, the lower standard of care will still apply. Don't expect City Hall to make sense.
I am pleased the DOL has given up on its plan to take control of how you invest your money. I offer my sincere thanks to my readers, clients and other like-minded people who wrote letters and spoke out in opposition to this government overreach. Your voices were heard and city hall responded. I am thankful we will finally have rules in place requiring all financial advisors to act in the best interests of their clients, which they should have been doing all along.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
Member www.finra.org / www.sipc.org , a Registered Investment Advisor. Wyson Financial, 1173 S. 250 W. Suite 505, St. George, UT 84770.
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