Department of Labor Fiduciary Rule is DOA
February 3, 2017 0 Comments
Tags: financial planning, retirement planning, women retirement issues
Today, the President delayed the Department of Labor’s Fiduciary Rule that was set to take effect in April. I have been advocating for either a repeal or a delay for many months. The rule was hastily written and poorly written during the Obama administration.
The DOL fiduciary rule attempted to legislate the definition of working in the best interest of a client. On the face of it, trying to legislate this kind of behavior is absurd. Compounding that absurdity, the regulation itself was rife with ambiguities that would undoubtedly create litigation between consumers and insurance companies, wealth management companies, banks and others. This country does not need anymore poorly drafted legislation leading to litigation over judgment calls.
All is not lost however. I truly believe that most professionals are working in the best interest of their clients. There are, for sure, some bad actors who just don’t seem to understand this concept. They seem to be intensely focused on how much commission a product pays or how high of a fee they can charge against the account each year. They will survive changes in regulations, that is for sure. The DOL’s failed attempt here has a silver lining. It most certainly was felt by some of these bad actors as a shot across the bow. Some will be more cautious now, some may even try to up their games.
For consumers of financial service products and advice, many have been monitoring the debate. Working in the best interest of a client is the gold standard for service. Fees and commissions are not the litmus tests. Charging fees is not better than being paid commissions. They are just different. That is an easy point to make. As one of the country’s leading proponents for life insurance without commissions, I would be the first person to say that a fee based model is better; but it isn’t.
The right professional makes recommendations based on several factors that place well ahead of compensation. The rejection of the DOL “fiduciary rule” today will not ensure that consumers have an easy way in determining who is working in their best interest. To know that always has and always will require a bit of work. I suggest that consumers ask for referrals, speak with other professionals such as C.P.A’s and attorneys as well as local chambers of commerce leaders. Trusting your gut is also important, along with the other due diligence.
If you would like to discuss this topic or anything else, please email Ted Bernstein or call me at: 561-869-4500
Also published on Medium.