Don’t Get Hung Up on Fiduciary Rule’s Fate; Focus Should Be on Planning

Just because your financial adviser is a fiduciary doesn’t guarantee you’re getting all the help you need. Here’s what every investor should insist upon.

(Image credit: Erik Khalitov)

Drumroll, please: As of June 9, the Department of Labor's long-awaited "fiduciary rule" has finally officially gone into effect. The rule requires financial professionals to put clients’ interests ahead of their own when they make retirement investment recommendations.

Sounds simple, right? Not so fast. Some critics argue that it goes too far. Others of us in the industry wonder whether the rule actually goes far enough toward fixing the problems that really are out there.

It’s a good step toward a noble goal: According to an estimate by the President’s Council of Economic Advisers, conflicted investment advice currently costs savers roughly $17 billion a year (opens in new tab).

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But the rule ignores non-retirement accounts, which, for many people, serve as a large asset source that also deserves preserving.

More significant, simply adjusting the way financial professionals are paid, and making the hows and whys of what we do clearer through improved reporting and disclosures, doesn’t necessarily address the need for more and better planning.

Consumers — particularly retirees and those in the retirement “red zone,” the five to 10 years before you leave the workforce — need more than just money-management or asset-allocation advice. They need help building a comprehensive, in-depth financial plan that will help them feel more confident about their future.

I think that’s what most people want — but it isn’t always what they’re getting. I’ve found that, while there’s no shortage of people out there selling financial vehicles, there is a shortage of financial professionals offering more holistic help for people who desperately need it.

Unfortunately, the lines have blurred, and financial professionals can refer to themselves by just about any title they choose: money manager, broker, agent, adviser, planner or wealth manager. The ever-evolving list of terms, as well as their varying roles and values, can be confusing and misleading for consumers. But there is a difference between selling and planning, and between the suitability and fiduciary standards.

Even investors with substantial funds can miss out on this important piece. They might work with people who have fancy offices or financial strategies and are good at what they do. But they’re ignoring the planning, and that’s a problem; when you accumulate more assets, there are a multitude of issues you must address.

I have a client, well into retirement, who came on board about a year ago with approximately $1.5 million in assets. He had a financial professional he met with frequently, but all they dealt with were investment issues — no tax planning and no wealth-transfer planning for a client who cares deeply about his family.

Consumers, especially retirees, need someone who can assist them with defining a time horizon, establishing long-term goals and keeping the focus on those goals instead of the day-to-day ups and downs in the markets.

It’s service vs. selling.

Even if the fiduciary rule had never come to pass, firms should still work toward giving their clients this kind of support.

Kim Franke-Folstad contributed to this article.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Bryan S. Slovon, Investment Adviser
Founder and CEO, Stuart Financial Group

Bryan S. Slovon is founder and CEO of Stuart Financial Group, a boutique financial services firm exclusively serving retirees and soon-to-be retirees in the Washington, D.C., metro area. He is an Investment Adviser Representative and insurance professional.