On Friday, February 3, Trump signed an executive order asking the Department of Labor (DOL) to review the fiduciary rule originally set for implementation in April of this year. Within the first few months of President Trump being in office, we have seen many executive orders signed to repeal, dismantle, or delay prior administration actions. Whenever there is a shift of party power, these orders are to be expected, so we anticipated, and even expected, the executive order around the fiduciary rule.
There are some pervasive, opinionated views on both sides of the ruling since its approval last year. Those in favor of the ruling believe that all Americans deserve retirement advice that is in their best interest, free of conflicts or commissions. Those opposed to the rule believe it will limit the availability of retirement advice and make it more expensive. There are some who argue the DOL is overextending its reach by meddling in investor retirement relations. Others advocate that the DOL is responsible for protecting retirees under the Employee Retirement Income Security Act of 1974 (ERISA).
When Mark and I started True North 17 years ago, it was in response to what we both experienced while working for Wall Street firms. We felt that the environment of the broker/dealer firm model, while financially prosperous, was morally bankrupt. We wanted to start a company that stood for something greater than commissions and revenue. We wanted to create a culture that lived and breathed the fiduciary standard in all its financial advice. So, while the world is catching up on the fiduciary conversation, we won’t be shaken by the outcome of an executive order, and we don’t think you need to be either. Let us briefly tell you why.
Three things we know to be true regardless of a government mandate:
- The attention this ruling has brought to the fiduciary standard is for the good of all, whether mandated or not.
One of the things we appreciate most about the DOL ruling is the way it has brought the word fiduciary to light in our day to day language. We love hearing it on the news and reading it across headlines, because we believe knowledge is power. The more people that know about the fiduciary rule, the more power the everyday investor has to decide for himself what type of advice he is looking for.
- The fiduciary standard is the best standard, whether mandated or not.
To review, the fiduciary standard is simply this: the advisor acts in the best interest of the clients, always putting the interests of the client before the advisor’s interests. In our opinion, who wouldn’t want that? While we understand that it is legal to operate under a suitability standard (as long as a recommendation meets a clients defined need or objective, it is deemed appropriate), we don’t believe it’s the best standard. The best investor/advisor relationship should not be transactional, but rather trust-worthy and transparent.
- All investors have the right to know if their advisor is a fiduciary, whether mandated or not.
Once equipped with the knowledge of what being a fiduciary means and how it serves as the best standard, the investor can approach the subject with confidence and assume control when it comes to choosing an advisor. By asking the right questions, you don’t need to wonder or guess how your advisor gets paid or if there are hidden fees in your portfolio.
Don’t wait for a mandate. Don’t hold out for a final ruling months from now or even years. The reins are in your hands.