How Game of Thrones Explains the Stock Market

Okay, that headline was a cheap trick to get you to click on this, but would you have really clicked on something called “Department of Labor issues new Fiduciary rule”? It may sound boring, but it’s important. Sorry not sorry.

Last month, the Department of Labor released its final rule regarding the fiduciary standard that it had been debating for over a year. In short, advisors overseeing retirement accounts will now be required to act as a fiduciary. This means they have a legal requirement to put their client’s interests ahead of their own—what a novel concept!

To be clear, this rule only affects those advisors who are advising on retirement plans that fall under the DOL’s regulatory authority—it is not a requirement for financial advisors serving individuals. Our hope, of course, is that this influences the SEC and FINRA to take a similar stance and require anyone holding themselves out as a financial advisor in any capacity to act as a fiduciary. Prior to that happening, however, consumers can always just demand that their advisor act as such.

Interestingly enough, one of the main arguments that opponents have made against the new rule is that a large number of middle class clients won’t be able to afford fiduciary advice. Frankly, this is absurd on two fronts:

1. It assumes that conflicted advice is better than no advice at all (it’s not), and
2. It posits that there isn’t relatively cheap fiduciary advice available (there is).

Finally, my last thought on the rule is that I hope it’s a first step towards principles-based regulation rather than the bureaucratic rules-based legislation we have now. A lot of unethical behavior goes unchecked in the financial industry because no rules are technically broken. However, under a principles-based regulatory structure advisors would simply need to do what’s best for their client. Harm done to the client, no matter how many small print disclosures were signed, would no longer stand as acceptable. It’s an intriguing possibility that would revolutionize the industry and be a huge win for society. Alas, sometimes my optimism gets the best of me and I’m not holding my breath for this new world.

In the meantime, TCI will continue to proudly embrace the fiduciary standard and change the industry from within.
Here are the main points to remember:

• If your friend asks if you use a fiduciary advisor, the answer is a resounding yes. TCI has operated under this standard since 1990, when we began business.
• As the fight to let the rule take effect begins, please observe who is for it and who is against it.
• This is a major victory for consumers and client-first advisors. Hopefully the first of many.