Recently, there has been much conversation regarding the new fiduciary rule and how it will impact the relationship between financial advisors and their clients. The original rule, finalized under Obama, was set to take effect earlier this year, but on his fifteenth day in office, Donald Trump asked the Department of Labor to reconsider the rule.
Then, on June 9, 2017, the Department of Labor’s Fiduciary Rule officially went into partial effect. The new rule places a greater responsibility on financial advisors to put their clients’ interests ahead of their own when providing advice on investing in retirement assets. Being a fiduciary would preclude an advisor from selling products with high fees and commissions that would benefit him or her to the detriment of the client.
Fiduciary advisors are registered with the state or the Securities and Exchange Commission (SEC) and are called “registered investment advisers” (RIAs). RIAs typically charge asset-based fees and do not accept sales commissions or other incentives. Since 10–15 Associates’ inception, we have been an RIA and are therefore already in total compliance with the new rule. Our fees are simple and straightforward. Since we work for a set percentage of the value of your account, we are automatically on your side.
The more predominant framework for advisors is that of the traditional stockbroker or agent model, where compensation is typically generated from sales commissions or residual payments. These are the advisors who will feel the impact of the new fiduciary rule. The Department of Labor has found (as has the SEC) that investors have been unclear about what the term “fiduciary” means and why it has such value. Study after study has confirmed that much of the investing public is confused and that, as a result, clients pay too much in commissions and fees, which reduces their returns. The new rule is designed to shed light on the compensation received by financial advisors.
While the future of the new rule is still in question, you can take comfort in knowing that 10-15 has a long-standing history of transparency and that our status as a fiduciary means that you can feel confident that your interests and our interests are aligned—and that your interests will always come first.