Financial advisors who act in your best interest seems like a no-brainer, right? But there is an ongoing debate on how to regulate the financial service industry.
In 2015, President Barack Obama issued a rule that would require all financial advisors to put their clients’ interests ahead of their own, also known as fiduciaries. Not all financial advisors are required to be fiduciaries, which the Obama administration claimed costs billions for investors.
The fiduciary rule was met with fierce opposition from financial service and insurance industries who said it would raise the cost of doing business with them. Both of these opponents successfully convinced the Fifth Court of Appeals to overturn the Obama-era rule.
Several states, organizations and some businesses are asking judges to keep the case open in hopes of keeping the rule alive. But watchdog agencies such as the Securities Exchange Commission are looking to set up their own replacement to the fiduciary rule called the best interest rule.
The rule would require financial advisors to report any financial conflicts of interest. This rule mainly applies to broker-dealers who are members of the self-regulatory FINRA, or Financial Industry Regulatory Authority. Whereas, registered investment advisors are for the most part fiduciaries.
The problem now is centered on how to regulate and define rules such as the SEC’s best interest rule. It’s no easy task, and the Obama-era rule left an impression to customers to demand financial advisors to lower fees and remove conflicts of interest.
Even as the Obama-era fiduciary rule seems to be gone, there are a lot stories to cover about fiduciaries and financial services, including online financial firms. According to the New York Times, online services have been pushing down their prices as they create an automated service to manage investment portfolios, but even these services still need workers. Reporters can also cover stories on older Americans who rely on their investment brokers to manage their money. Some investment brokers don’t always act in the best interest for their customers, making investment decisions a gamble. Overall, handling people’s money is a big responsibility and it’s an even bigger one for older investors who are in retirement. This makes a good opportunity to ask fiduciaries where they see the industry heading in terms of regulation, abuse and fees.
You can also share helpful tips to share with readers about fiduciaries and financial advisors.
- If an investor wants to work with a fiduciary, tell them to ask the person pledge in writing they will act in the client’s best interest. Anyone can call themselves a financial advisor. Advise your readers to not take titles at face value. Tell your reader that having a fiduciary will not eliminate all problems, but it can be a defense from having financial advisors push products that is not in the best interest of their clients.
- Tell readers to be picky with who they choose to manage their money. There are plenty of databases to help them find a fee-only financial planners, which is recommended by financial advocates, such as the National Association of Personal Financial Advisors, the Garrett Planning Network, the XY Planning Network and the Financial Planning Association.
