There is talk of the Trump Administration overturning (or not enforcing) the Dept. of Labor’s new “Fiduciary Rule,” the gist of which is: all investment advisors on retirement accounts — IRAs, 401(k)s, etc. — must act in the best interest of the client. Whatever the outcome on this new rule, this will not affect the work we do here at LNWM. We have always – and are actually required by existing law – to act in our clients’ best interest. But many types of investment advisors are not.
There are two groups of investment representatives, and I have worked with both during my 30+ years in the business:
Group #1: Investment advisors, such as those here at LNWM, who are regulated by the SEC and/or a state securities regulator, are considered fiduciaries. We are required by law to act in our clients’ best interest. Typically, we are compensated by asset management fees paid by the client.
Group #2: Stockbrokers, broker-dealer registered representatives, bank representatives, insurance agents and others who are regulated by the Financial Industry Regulatory Authority (FINRA) and/or by state insurance regulators. By law, their investment recommendations must be “suitable” based on the client’s situation but they are not required to act in their clients’ best interest. They are often paid commissions when they sell specific mutual funds, annuities or other financial products, and this can put them in conflict with what is best for the client.
The New Rule
On April 20, 2016, the DOL reissued a proposed Rule expanding the definition of fiduciary to include a wider range of people providing financial advice, specifically regarding IRA acounts, defined-benefit pension plans and defined-contribution 401(k) plans.
The DOL was attempting, in large part, to respond to the long-running debate over whether all financial professionals should operate as fiduciaries and be required to always act in the best interest of their clients. The Rule attempts to further clarify the debate around compensation and conflicts of interest.
Regardless of how adoption of this Rule evolves, every LNWM Advisor has always — and will continue to be — subject to the fiduciary duty standard and act in the client’s best interest. As a fee-only financial planning firm, our advisors are paid a salary, not a percentage of every transaction they make on your behalf. This ensures that your investment strategy is based on your goals, not on generating commissions.
The bottom line: At Laird Norton Wealth Management, you get an unbiased advocate for your life, your wealth and your legacy.