Fiduciary Rule

The fiduciary rule is just a boon for lawyers to sue financial advisors.

The idea of the fiduciary rule is very much needed in the financial planning profession. Currently, only CFP's are considered and act as a fiduciary with clients. Therefore, the spirit of the rule is a good idea, however the details and compliance of the rule was literally almost impossible to follow.

For example, an advisor would be prohibited from recommending an investment that would charge more than the clients current qualified plan such as a 401k. Sounds good right? Well not so fast. You see, unless your 401k advisor is a fiduciary on the plan they are prohibited from giving actual investment advice. Their interactions with participants is limited only to education - not actual advice or recommendations. A 401k normally has low fees. A Vanguard or Fidelity plan may be as low as 20 basis points. So the problem arises when a participant wants to retire and engages an advisor at Merrill Lynch or Morgan Stanley or wherever to develop a comprehensive financial plan for retirement. They may charge for creating a fully fleshed out plan in the neighborhood of a 100 basis points or 1% of account assets. The difference is the advisor is actually providing specific advice to the retiree. Under the Fiduciary rule this would have been a prohibited transaction because it would cost more to work with an advisor than simply keep your low cost 401k even though you cannot by law get advice on it.
This is an obvious catch 22 and makes in nearly impossible to work with a clients retirement plan at work. A handful of 401k participants are knowledgeable enough about stocks to get by, but the overwhelming majority (I'm guessing 80%) couldn't tell you the difference between a mutual fund and an individual bond and need and want professional help with their life savings

Another part of the rule included giving more disclosure on fees. Again good thing right? Well not unless you read how they wanted the advisor to do it. They wanted the advisor to give not only 10 year growth projections on investments but also what that fee would be and have the advisor sign off on it. That's an impossible position to put an advisor in because you are signing off on future growth targets and that can vary significantly depending on market conditions. To be clear, just as with any professional service, you should have a full understanding of your fee structure before working with a financial advisor. But compliance of this part of the rule makes every advisor in business a sitting duck for lawsuits the next time the market tanks.

Again the spirit of the rule is right on, but the actual rule looked like it was written by someone who had never worked or been involved with financial planning. Many aspects of the rule looked as if the writer lacked even a basic understanding of the profession. It should be scraped and rewritten to actually protect investors. The rule as it stands now is ominous and incredibly overreaching and ultimately not only punishes advisors but also investors seeking advice.

Btw, many other aspects to rule that are pretty ridiculous. But as we know now Trump is literally Hitler so this is going to be pushed as if he is releasing the wolves on innocent investors and now we are all unprotected. Its Horse shite. Putting your clients interest first is not only a good idea, but its pretty much the only way to run a successful business and in my experience 95% of advisors out there already do that

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They wanted the advisor to give not only 10 year growth projections on investments but also what that fee would be and have the advisor sign off on it.

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This is beyond laughable.

Great post by the way.

I never expect anyone but me to operate in my best interest.

It's probably an unmanageable law.

Is too much risk bad or is not enough risk bad? Subjective things like portfolio Managment are not easily enforced.

If the put my retirement in CDs, it is safe, except against inflation. If they put my assets in stocks, they may decline.

At the end of the day, caveat emptor is always in play.

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Fiduciary Rule
#maga here, but can someone explain to me how rolling back the fiduciary rule is good for the average American citizen?

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Wir haben gestern die Treuhandregel besprochen

Wrong wrong wrong. I stopped reading once you said only a CFP is considered a "fiduciary."

You stated that only CFP is held to a fiduciary standard, if you have a series 66 you can be held to a fiduciary standard. Most wirehouses can work as both a broker/dealer and an investment advisor.

The financial industry should get behind some form of fiduciary rule. The lack of one is why I don't trust them and will not go to them.

I may end up poorer based on my own planning, but I refuse to take a chance letting some guy direct my investments when he doesn't legally have to perform in my best interests as a fiduciary.

Come join us in fee-only CFP land. While not legally bound, we do have act in the best interest of the client per the CFP code of ethics.

I'm actually kind of glad they rolled the fiduciary rule back. It's a business opportunity for me. I'll gladly explain to a prospective client the differences between the fiduciary standard and suitability standard held by your standard advisor.