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Do I Need a Fiduciary?


The Fiduciary Rule is officially dead.  If you recall, this rule was to go into effect last year.  The whole concept was to require licensed advisors to put their client’s interests first.  Yes, there had to be a rule to force advisors to put their client’s interests ahead of their own (excuse me while I go bang my head against something).  There were all kinds of legal challenges and the rule has officially been deemed over. 

Now, I am a fiduciary.  As a CERTIFIED FINANCIAL PLANNER™ (they make me type that in all caps), I am required to act as a fiduciary.  Even if I weren’t a CFP® I would still act as one.  Regardless, I thought it was important to share some recent headlines as to why having a fiduciary rule in place makes sense, at least to little old me.

  • Merrill Considers Lifting Ban on Commission-Based Retirement Accounts – WSJ
    • A couple of years ago Merrill Lynch was going to switch over all its retirement accounts so they would comply with the fiduciary rule.  When the rule was going into effect they were a leading advocate of fee-based accounts.  Now that the rule isn’t going anywhere, well, I guess having commission-based accounts are good…for someone.
  • The Free Trips Your Financial Adviser Takes Could Cost You – WSJ
    • While not directly on topic to the concept of acting like a fiduciary, this article tackled how incentive trips, sometimes masked as educational ones, can cause cloudiness for brokers when it comes to providing recommendations in your best interest.
  • Merrill Lynch Fined $42 Million for Misleading Customers – InvestmentNews
    • Again, not a direct connection to the fiduciary rule.  But do we have to wonder if a company that was not only “masking trades,” but also going “to extremes to cover up the wrongdoing” is really going to put anyone’s interests ahead of their brokers.
  • From Hawaii to Italy, Free Trips Fuel Retirement Savings Sales Push – Politico
    • Similar story as the Free Trips article above.  One of my favorite quotes in the article is – “Incentives matter in the financial services industry and as long as these trips exist, products that wouldn’t ordinarily sell well with be foisted on consumers.” The usual suspects are mentioned in this article, such as Primerica, Edward Jones, and John Hancock.
  • Morgan Stanley to Pay $1 Million to Settle Sales Contest Allegations – Boston Globe
    • This fine was over a year ago for sales practices in MA and RI.  Not only were the practices against state rules, but also against internal Morgan Stanley ones.  However, after Morgan Stanley execs learned of the contest in violation of its own rules the contest continued for months.
  • SEC Fines Wells Fargo Advisors over Investment Sales – Reuters
    • This is the most recent article on the list as it was reported in late June.  Not a surprise to see Wells Fargo here.  The fine was just over $5 million.

 These are just a few examples I have seen.  Now, I am not one to want too much government, however, a basic rule to require “licensed professionals” to put their client’s interests ahead of their own doesn’t feel like government overreach to me.  But since that rule is dead the onus is on you to make sure your advisor will always act like a fiduciary and will put it in writing.  If not, well, hopefully he or she will send you a postcard from a nice vacation you may have funded.