The Fiduciary Rule, which forces investment advisors to a higher standard, has an uncertain future
The good news if you invest through us: Our already high standards will remain
The Department of Labor’s Fiduciary Rule, which would require investment advisors to show their clients exactly what fees they’re charging them and what commissions they might be receiving, is still slated to take effect April 10, 2017.
But President Donald Trump’s administration is taking another look at the rule. After originally indicating it wanted to delay the rule’s implementation by 180 days to give the secretary of labor time to review its effect, the administration’s final memo did not include the delay.
The Fiduciary Rule requires all financial advisors who sell or manage retirement plans or accounts (such as IRAs) to maintain a higher standard as a fiduciary and act in the best interest of their clients. No longer can advisors simply find “suitable” investments for their clients, which had a loose standard based on an investor’s objective and financial means. The rule legally binds them to disclose, in dollar amounts, how much in fees they are collecting and how they’re collecting them as well as the overall benefit to their clients’ retirement savings.
When an investment advisor is collecting revenue sharing from financial product companies for selling their products, known as 12b-1 fees, there could be a conflict of interest. The advisor collects those revenues in addition to the fees he or she charges to the client, which is perfectly legal. But under the Fiduciary Rule, the advisor will have to disclose to the client how much the account fees are and how they were earned.
In spite of all the confusion and uncertainty surrounding the rule and no matter the final outcome, for our bank, we won’t have to change a thing.
Our investment professionals already act as fiduciaries for our clients, which means if the rule is finally implemented, there will be no surprises from us. We have always believed in acting in our clients’ best interest and explaining everything in understandable terms. Because of that transparency, our clients know up front any and all fees that are charged, and it is part of our culture to monitor our expenses for the benefit of our clients. An open and honest relationship, we have found, always works best.
So our clients will notice additional paperwork to meet the Fiduciary Rule. But that’s it.
Whether we are running the retirement plan for a business with tens of thousands of members or overseeing individual accounts, our approach is the same. We search for value investments that deliver long-term growth rather than chase the latest and greatest.
That doesn’t mean we can’t be aggressive. We will tailor any investment approach to fit our client’s capacity for risk. But it’s managed risk, which means we’ll give you the best advice even as markets fluctuate. We listen, lend clients our expertise and treat all clients with the same importance.
We also help business owners be good fiduciaries to their plans, ensuring they meet their responsibilities while protecting them by continuously reviewing their accounts.
We know the Fiduciary Rule can be confusing, especially if you visit the Department of Labor website and get lost in the financial-speak. But we are happy to talk about the changes, whether you are a current client, considering becoming one or just interested in learning more about the rule and how it might affect you. Go here to get the conversation started.
Investments are not FDIC insured, not bank guaranteed, and may lose value.