At first blush, the fiduciary standard is a big win for consumers. Hopefully it will be, though I have my doubts. 

It’s still the Wild West when it comes to investment advice. It’s absolutely legal for an advisor to capture the lifetime savings a consumer has built up in their 401(k), have them roll it into an IRA and then sell them an annuity paying handsome commissions -- that leads to a nice trip to the Ritz-Carlton Grand Cayman to boot. That’s more than wrong and I’ve seen it too many times.

But will the fiduciary rule fix these abuses? 

Consider a case several years ago of a CFP with fiduciary duty who sold an annuity to a client. The CFP apparently couldn’t make up his mind whether to charge commission or ongoing management fees, so he did both. I estimated the total fees at 5.29% annually. The facts were so egregious after complaints were logged, that the insurance company and broker-dealer offered a very fair settlement without the involvement of lawyers. 

The consumer told me he had trusted the advisor because he knew he had to act in his best interests. When the consumer filed complaints on breach of fiduciary duty, regulators and the CFP Board all found no wrong doing. This outcome led me to conclude that no matter how lofty the mission statement may be, in practice, the fiduciary standard isn't enforced. 

A fiduciary standard isn’t exactly new. The Investment Company Act of 1940 gave this fiduciary duty to both advisors and directors of mutual funds.

I could go on and on regarding all of the abuses by dubious fiduciaries I’ve discovered while reviewing client portfolios of the consumers who placed false reliance on the belief that advisors were legally obligated to put the client’s interests ahead of their own.

I’m of the belief that consumers are actually harmed if they are told by their advisor that they must put the client’s interests ahead of their own and then don’t. It builds a trust that might not be there if a lower standard is communicated.

The question remains as to whether any regulator or credential licensor (such as the CFP Board) will actually begin to enforce the fiduciary standard. 

In my view, if past is prologue, then there is little reason for optimism that this will ultimately be good for consumers. But perhaps the Department of Labor's approach will be different.  After all, they at least think something going on right now is wrong and I couldn’t agree more.

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