The word “fiduciary” is popping up quite a bit in the financial press lately. That is because the Department of Labor recently issued a ruling that expands both the definition of that term and its applicability. The rule’s anticipated consequences – like the financial services industry itself – are rather complex and will likely change the business models of many financial advisers. Rather than getting caught up in the nuances of the rule, however, you as a consumer of financial services should take this opportunity to ask a relatively simple question: Is your financial adviser (or the one you are thinking of hiring) focused on looking out for your best interest?
That, after all, is the main point of the new fiduciary rule. In the past, advisers paid to give advice for 401(k) accounts or IRAs only needed to assure that an investment was suitable for a client’s risk tolerance. The DOL rule requires that the adviser, instead, in serving as a fiduciary must give advice that is in the investor’s best interest, that fees be transparent, and the adviser charge no more than reasonable compensation.
The industry has devoted much time and resources to determining the changes that need to be made under this rule. (Even the circumstances surrounding the effective date are complicated. The 1,023-page rule, which has been delayed a couple of times, became partially effective June 9, and is set to be fully effective January 1, 2018.)
The DOL rule will have served an extremely valuable purpose if it merely encourages you as a consumer of financial advice to confirm that your adviser:
• Makes every effort to understand your entire financial situation and any change of circumstances in your situation over time.
• Makes it a point to educate you so that you can adequately comprehend the options available to you.
• Provides you with a clear explanation of how he or she gets paid. Is it a flat fee, a fee that is a percentage of the assets under management, or through commissions on the sale of products?
From the day of our firm’s founding more than 20 years ago, we have strived to always look out for our clients’ best interests. So, meeting a fiduciary standard is nothing new for us. In fact, whenever we at The Kelly Group are asked if we are a fiduciary, a quotation from Winston Churchill comes to mind. He famously said, “For myself I am an optimist – It does not seem to be much use to be anything else.” Well, substitute the word “fiduciary” for “optimist”, and that expresses how we feel. We are fiduciaries; we don’t see much use being anything else. I95 Content Marketing
Bryan E. Kelly, CFP®, is founding partner of The Kelly Group, a Bel Air-based firm providing comprehensive financial services. In 2017, The Kelly Group is celebrating its 20th anniversary.
Securities offered through Cambridge Investment Research, Inc. A Broker/Dealer, Member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc. a Registered Investment Advisor. The Kelly Group and Cambridge are not affiliated. 54 East Gordon Street,
Bel Air, MD 21014.