Shame Definition, according to Merriam-Webster:
- a : a painful emotion caused by consciousness of guilt, shortcoming, or impropriety b : the susceptibility to such emotion <have you no shame?>
- 2: a condition of humiliating disgrace or disrepute : ignominy <the shame of being arrested>
- 3a : something that brings censure or reproach; also : something to be regretted : pity <it's a shame you can't go>b : a cause of feeling shame
I thought of the word “shame,” when news emerged that President Trump and Congressional Republicans were launching an effort to delay and perhaps kill portions of the Department of Labor’s fiduciary rule, which is scheduled to begin implementation on April 10th. The potential about-face is a slap in the face to anyone who cares about investor protections.
Let’s step back and review what I like to call, “the F-Word”. Fiduciary is the standard of care, which requires financial professionals to put the interests of their clients first. That principal might seem obvious to any consumer, who would rightly imagine that someone who is talking to her about her financial life should put her interest before his or his company’s interest, right?
But the majority of the financial services industry has been held to a lower standard, which was called “suitability.” The bar for suitability was lower – it meant that any financial product that was sold had to be appropriate for you, though not necessarily in your best interest. The problem is that most investors have been unaware of the different standards that have applied for all of these years.
Of course, when asked by the CFP Board, nine out of ten Americans agreed that when they receive financial guidance, the person providing the advice should put the consumers’ interests ahead of theirs and should have to tell consumers up front about any conflicts of interest that could potentially influence that advice. The higher bar was about to become a reality, at least for those seeking guidance on their retirement accounts. Last year, the Department of Labor announced new rules about the fiduciary standard for professionals who service retirement savers.
Despite lots of squawking by big financial firms (they spent millions of dollars lobbying lawmakers in an effort to kill the rule), those crybaby companies had somehow managed to prepare for the implementation of fiduciary, by adding different choices for investors and/or by beefing up their staff numbers. As the Financial Planning Coalition had anticipated when the rule was being considered, “Empirical research and the Coalition’s practical experience confirm that middle income investors will retain ready access to professional financial advice under a fiduciary standard of conduct.”
And now, with the industry resigned and ready -- and just months to go before implementation, if the government takes the position that the fiduciary standard is not important, than ask yourself this question: If a broker or salesperson doesn’t want to put you first, why should you work with him?
Here’s what you can do: vote with your business and punish any firm that does not adhere to the fiduciary standard. There are tens of thousands of financial professionals ready to help you, including those with the CFP® certification from the Certified Financial Planner Board of Standards (CFP), CPA Personal Financial Specialists (CPA-PFS), members of the National Association of Personal Financial Advisors (NAPFA), those who have earned the Chartered Financial Analyst (CFA) designation and about 70 percent of the members of the Financial Planning Association (FPA). You can also work with a robo-advisor, a far better alternative than a conflicted salesman who is pushing a more expensive investment product than you need.