To be or not to be a fiduciary, that is the question

Should a stockbroker act in the best interests of the retirement saver or act in the best interest of the stockbroker?

fiduciary responsibility means client goals come first

Fiduciary responsibility means client interests come first

If you’ve read several of our posts by now, then you know we firmly believe that financial advisors should always act in the best of interests of the retirement saver. Call them what you want, stockbroker, retirement consultant or advisor, the client’s goals should always come before anyone’s sales goals.

This means they should act as a fiduciary, not a salesperson.

What’s the fiduciary debate about?

Congress, the Department of Labor (DOL) and the Securities and Exchange Commission are fiercely debating if a stockbroker should act in the best interests of the IRA investor.

Investment News, April 12, 2013, reported: “The DOL’s fiduciary duty rule is slated to be re-proposed over the summer. It was originally released in 2010 but withdrawn amid fierce financial industry criticism.”

The agency said, “advice standards for retirement products have to be increased to better protect investors who are building their own nest eggs. Critics argue the rule would impose fiduciary liability on IRAs for the first time and drive brokers out of the market.”

Should a stockbroker act in the best interests of the retirement saver or act in the best interest of the stockbroker?

The financial services industry believes if stockbrokers have to do what is best for the IRA saver they will be forced out of business and the little guy will be hurt without financial advice.  The financial services industry believes the individual retirement saver is better getting poor, conflicted advice, than no advice.

What’s the fiduciary debate really about?

The debate is really about stockbrokers who currently do not act with fiduciary responsibility are more concerned that their own paycheck may potentially be reduced than they care about doing the right thing for the retirement investor (their client).

A stockbroker may recommend a mutual fund (in their best interest, not yours) that carries much higher expenses than a low-cost investment because he gets a commission for making the sale. This is called the “suitability” standard. While the investment is suitable, it may not be the best possible option for the investor. Making the best possible decision for the investor is called the “fiduciary” standard.

With the suitability standard, the stockbroker has no duty to continue to update the retirement saver if the mutual fund changes managers or delivers very poor returns. Once the stockbroker makes sure the mutual fund is “suitable” when he sells to it you, his responsibility ends. So who’s watching your investment? You are. Even if you didn’t know you are responsible to do this, you know now.

The answer shouldn’t take a debate 

Skip the middleman’s financial advice and directly invest your retirement savings.

Congress, we know what every retirement saver wants so here is the solution – Eliminate the conflict of giving advice for a fee without putting the investor’s interest above all else.

Educate retirement savers how to invest directly with portfolio managers, save fees, eliminate fraud, eliminate placing seniors in appropriate investments and save on government oversight on an industry that has proven ineffective in helping Americans save for retirement.

Skip the middleman’s financial advice and directly invest your retirement savings. Try Not On My Nickel’s “Do It Yourself” Service.

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