Do Potential Changes to the Fiduciary Rule Mean Trouble for You?

Trust in your Fiduciary

A year ago the Department of Labor expanded the number of financial advisors required to adhere to the fiduciary standard for retirement asset and accounts. This was clearly good news for investors. Adoption has now been delayed, however, and the future of this consumer protection is not clear.

Fiduciary means “Trust”

The word “Fiduciary” (from a the Latin word for “something inspiring trust”) describes a category of registered independent investment advisors who – like Sherman Wealth – are required to act solely and exclusively in the best interest of their clients. Our decisions are not colored by any expectation of additional income from the products we recommend.

Don’t all advisors work in their clients best interests?

Not necessarily. While it seems obvious that giving you the best advice is what you expect your advisor to do – it’s what you pay them for after all – broker-dealers are not required to operate as fiduciaries.

Broker-dealers have only been required to recommend products that are deemed a “suitable” choice for a client, not necessarily the best choice. Broker dealers can therefore recommend investments they receive commissions for selling or that their firm has an interest in, whether or not they are the best choice for you.

Let’s put it this way: as long as their recommendations are in the ballpark, they don’t have to aim for hitting it out of the park for you.

The new fiduciary rule should be a win-win, right?

Again, not necessarily. The new rule, which was passed under the previous administration, was set to go into effect this week and would have required the widespread adoption of the fiduciary rule for investment accounts and assets.

That would have given investors greater protection and greater confidence in the advice they are getting from their advisors.

The DOL has delayed the date of adoption until June 9, however, as the result of an executive order by the new administration. The current administration says it needs time to examine and review it, given, among other things, the Financial Industry’s concerns about costs to them, including the money they are earning on commissions from clients like you.

How does this affect your Financial Future?

If you are already working with a fiduciary, not at all. You are already covered, for all aspects of your investments, not just retirement funds.

If you are not already with a fiduciary advisor, even if the new rule is adopted in some form or another, it only applies to retirement investments and potentially not the full spectrum of your investing strategy, so you are still not getting the most transparent, trustworthy advice you can.

What should you do to insure you’re getting conflict-free advice?

Find out if your investor is a fee-only Fiduciary. Ask them. They are required to tell you. And don’t be fooled by “fee-based.” A true fiduciary does not take commissions and is conflict-of-interest free.

Hopefully the DOL will act in the best interest of consumers and investors. Even if the future of the new ruling is unclear, you can protect yourself by working with one of the many advisories that has – like Sherman Wealth – already adopted the Fiduciary Standard for all investment categories.

At Sherman Wealth we are proud to operate as fee-only fiduciaries, which means that our decisions are based on your goals, your risk tolerance, and your plan. Nothing more and nothing less. We couldn’t imagine bringing anything but our best advice to our clients’ financial futures.


The views expressed in this blog post are as of the date of the posting, and are subject to change based on market and other conditions. This blog contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Please note that nothing in this blog post should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax or legal advice. If you would like investment, accounting, tax or legal advice, you should consult with your own financial advisors, accountants, or attorneys regarding your individual circumstances and needs. No advice may be rendered by Sherman Wealth unless a client service agreement is in place.
If you have any questions, please Contact Us.

Recommended Posts