At Approach Retirement Advisors, we are fiduciaries and we look forward to welcoming new advisors into the fiduciary family.
Unfortunately, a U.S. judge has halted a Department of Labor regulation that aimed to broaden the scope of retirement advisers classified as fiduciaries. The new rule was meant to close a loophole in the fiduciary standard that did not apply to recommendations for purchases of non-securities such as fixed index annuities, which are typically sold by insurance companies.
On July 25, a federal judge issued a nationwide injunction preventing the rule from taking effect on September 23.
Why Does This Matter?
Broadening the fiduciary standard to protect investors involves ensuring that financial advisors and other investment professionals act in the best interests of their clients, rather than merely meeting a suitability standard. This broader standard enhances investor protection in several ways.
First, the fiduciary standard instills a higher level of trust between clients and their advisors. Fiduciaries are legally obligated to prioritize their client’s financial well-being over their own profits, and they must disclose any potential conflicts of interest. This transparency provides clients with a clearer understanding of how their advisor’s recommendations are made, fostering a more trusting relationship, better financial health, and greater stability.
Secondly, we believe the quality of advice improves under the fiduciary standard. Fiduciary advisors are required to provide recommendations that are in the best interest of the client, not themselves. This should lead to more objective and unbiased advice.
Minimizing conflicts of interest is another significant benefit. Fiduciaries must recommend the best products for the client, not just suitable ones, helping avoid unnecessary or high-cost investments.
Greater accountability is inherent in the fiduciary standard. Fiduciaries are held to a higher legal standard and can be held accountable for failing to act in their clients’ best interests. They adhere to stringent professional standards and codes of ethics, ensuring high-quality service and reducing instances of misconduct and unethical behavior.
Finally, broadening the fiduciary standard enhances market integrity. By adhering to higher ethical standards, the financial industry as a whole can improve its reliability and trustworthiness. This leads to a more trustworthy and reliable market environment, protecting the broader investor community.
How Can You Find an Advisor Who is a Fiduciary
Well, we know this is a blatant plug for our own advisor practice, but the advisors with Approach Retirement Advisors are fiduciaries. We are always looking out for our clients’ best interests and work closely with them to help ensure they have a financial plan that works for them now and evolves with them as life happens.
Beyond that, there are several ways you can find a fiduciary.
Ask Directly: When interviewing potential advisors, investors should ask if they are willing to sign a pledge to act as a fiduciary in all aspects of the relationship. This written commitment ensures that the advisor will act in the investor’s best interest.
Certified Financial Planner (CFP) Board: The CFP Board maintains a directory of Certified Financial Planners, all of whom are required to act as fiduciaries when providing financial advice. Investors can use the “Find a CFP® Professional” tool on the CFP Board’s website.
National Association of Personal Financial Advisors (NAPFA): NAPFA is a professional association of fee-only financial advisors. All NAPFA members are required to act as fiduciaries. Their website offers a “Find an Advisor” tool that helps locate fee-only fiduciary advisors.
Registered Investment Advisors (RIAs): RIAs are legally obligated to act as fiduciaries. Investors can use the SEC’s Investment Adviser Public Disclosure (IAPD) database to verify an advisor’s registration status and disciplinary history.
While we believe that broadening the fiduciary standard protects investors and want to see the injunction lifted, it’s important to remember that you are still in control of your financial future. The bottom line is that not all investment advice is equal; it’s important to do your homework, interview more than one advisor, and find the right fit for you and your family. CLICK HERE to reach out with any questions.