We’ve all heard the phrase, “Change is constant,” and that couldn’t be truer especially when it comes to the financial services industry. The latest is the change to the fiduciary standard that is the result of the 2008 crisis. The updated fiduciary rule stipulates how the financial services industry communicates and represents clients.
What is an investment fiduciary? An investment fiduciary is a financial services professional who is required to act in the best interest of their clients.
During the Obama administration, issues with the fiduciary rule were addressed including who is considered a fiduciary and a definition of investment fiduciary regarding retirement plans including Defined Contribution Plans, like 401(k) plans or Simplified Employee Pension (SEP IRA) plans, Defined Benefit Plans, like Pensions, and Individual Retirement Accounts (IRAs). The Trump administration delayed the implementation until recently.
The New Fiduciary Rule
The new regulations were effective as of June 9, 2017 and establish that Financial Advisors are required to provide investment recommendations that are in the best interests of our clients. Previously, advisors were not required to act in the best interest so this is a new idea for them. Acting as a fiduciary is one of the major reasons that I chose to leave Merrill Lynch and become an Independent Financial Advisor and founded Blue Dot Wealth Management.
While the Impartial Conduct Standard rules starting June 9th of 2017, there will be further review and implementation of standards beginning January 1st, 2018. While some of these rules may additional disclosures and some additional cost, they are, in my opinion, the absolute right thing to do. These rules will broadly touch on the following pillars:
1. Give advice that is in the best interest of our clients.
2. Charge no more than reasonable compensation.
3. Make no misleading statements.
Over the course of the next six months, Blue Dot Wealth Management will be talking more about these changes as we walk you through the process, including rolling out new tools that allow us to simplify our process while serving you, our clients and friends.
Change, in this case, is good because it leads to innovation and improved client experience. I look forward to helping lead us toward a more transparent and accountable environment.
All the best,
Rob