As legal advisors it is crucial for our clients to trust us.\u00a0 Without trust, clients cannot be confident in the information and guidance we give them.\u00a0 Many of our clients also work with financial advisors. \u00a0In our firm, we have come to know and respect the way many such advisors conduct their practice on a similar basis of competence and trust.\u00a0 The clients of financial advisors certainly need to trust the advice they receive.\u00a0 And similar to the legal profession, financial advisors already have a variety of ethical rules they must adhere to.\u00a0 But a new Department of Labor (\u201cDOL\u201d) rule is sure to pose some new challenges to financial advisors.<\/p>\n
The so-called \u201cFiduciary Rule\u201d was originally proposed under the Obama administration.\u00a0 A fiduciary by definition is obligated to act in the best interests of another.\u00a0 The new Fiduciary Rule obligates financial advisors to act in the best interests of their clients.\u00a0 Pro-consumer groups have lobbied for such a rule for years.\u00a0 According to a 2015 report by the White House Counsel on Economic Advisors, Americans lose about $17 billion from retirement savings every year because of bad financial advice from advisors with conflicts of interest.\u00a0 The clear intent of proponents of the Fiduciary Rule is to try to lessen the impact of such conflicts of interest.<\/p>\n
Currently, advisors are just obligated to suggest financial products that are suitable investments, but not necessarily the best investments.\u00a0 The new rule will require all financial professionals who offer advice related to retirement savings to not accept compensation or payments that would create a conflict unless they have an enforceable contract agreeing to put the client’s interest first. \u00a0Advisers also would have to disclose any conflicts to the client and charge reasonable compensation.<\/p>\n
The Trump administration is generally in favor of governmental deregulation.\u00a0 In April 2017, Trump signed an executive order delaying the effective date of the Fiduciary Rule by 60 days and he called for additional review of the rule, seemingly setting the stage for a possible repeal.\u00a0 Yet the Department of Labor has indicated that the rule has in fact become effective as of June 9, 2017.\u00a0\u00a0 Nonetheless there are many in the financial services industry that remain confident that the Trump administration will eventually take steps to soften the rule.<\/p>\n
What are the downsides to the Fiduciary Rule? The Rule will inevitably expose financial advisors to greater liability. \u00a0Therefore good financial advice will probably become harder to obtain.\u00a0 Advisors will need to charge more for their services and they will necessarily become pickier about who they take on as clients in the first place.\u00a0 Another concern is that the rule may drive many smaller, independent advisors out of the business entirely.\u00a0 In 2011 a similar rule was passed in the U.K. and the number of financial advisors operating there has dropped 22.5% as a result.\u00a0 Clearly, it is too early to tell if there will be a similar reaction in the U.S. but some industry changes should be expected.<\/p>\n
If you have any questions about the issues presented above or care to discuss any other planning issues, please call us at 860-769-6938, visit our website at http:\/\/www.weatherby-associates.com<\/a> or email us at info@weatherby-associates.com<\/a>.<\/p>\n https:\/\/weatherby-associates.com\/fiduciary-rule-financial-advisors<\/p>\n","protected":false},"excerpt":{"rendered":" As legal advisors it is crucial for our clients to trust us.\u00a0 Without trust, clients cannot be confident in the information and guidance we give them.\u00a0 Many of our clients […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2920","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"yoast_head":"\n