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Conflict Of Interest Rule A Major Win For Investors

The Labor Department on Wednesday unveiled new rules designed to protect investors with retirement accounts from stockbrokers, insurance agents and other types of financial advisors who would put their own interests ahead of their clients' financial needs. The change is meant to prevent some advisors from making recommendations or selling investment products their clients don't really need. We believe this is a major win for investors.

The new rule, called the Conflict of Interest Rule on Retirement Investment Advice[1], establishes a "fiduciary" standard for those rendering advice to clients with retirement accounts, which means it applies to company retirement plans as well as an investor's IRA. Being a fiduciary simply means the advisor must act in the best interests of their client, even if such action conflicts with the best interests of that advisor. Most often, conflicts of interest of this nature come down to how an advisor is compensated. Many investors have discovered the hard way that commission-based brokers -- selling insurance, annuities or other fee-laden investment products -- don't always have their best interests in mind. Many financial solutions end up costing investors much more than necessary simply because of the commission structure that is used to compensate their advisor, and often there is little or no transparency to those costs.

Clients who work with our firm will recognize that we already hold ourselves to this fiduciary standard, and have done so since our founding. As an independent, fee-only practice, we work directly for our clients, not a third party fund company or Wall Street bank. We receive no commissions for any investment products we recommend. In this regard, the new labor department rule does not change our business practice. It does, however, re-affirm our longstanding commitment to provide conflict-free advice, and we are happy that other advisors will soon be joining us -- now compelled to act as fiduciaries for their clients' retirement accounts.

Investors should still be aware, however, that the recent Labor Department rule does not go into effect until 2017, and that it only applies to retirement accounts, such as a company 401(k) or an IRA. In other-words, some financial advisors will still have the option to not act as a fiduciary on non-retirement accounts they manage, unless they have contractually agreed with their clients to meet this standard. That's unfortunate, but we hope this recent change on retirement accounts will encourage investors to ask more questions. Clients deserve objective, unbiased advice that is free of conflict, regardless of the account types they hold, and regardless of the personal needs of the advisor giving it.It's important for investors to learn how their advisors are compensated, and whether or not they act as a fiduciary in all aspects of their relationship.



[1] Department of Labor, Employee Benefits Security Administration, 29 CFR Parts 2509 and 2510,

RIN 1210-AB32, Definition of the Term “Fiduciary”; Conflict of Interest Rule – Retirement Investment Advice.

See Disclosures.

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