Is Your Financial Planner a Fiduciary?

The word ‘fiduciary’ is unfamiliar to most. In simplest terms, a fiduciary is someone who works on behalf of a client with their best interests in mind. The reason it hasn’t had much mainstream attention is because, to date, financial planners have not been required to operate as fiduciaries. But that is all about to change. A new standard was recently approved by the Department of Labor (DOL) requiring all financial planners to act as fiduciaries when advising on retirement accounts. It’s important that each household understands how this important change impacts them, and how to know they have an advisor who can serve them well now and in the future.

The Rise of the Fiduciary Standard

You may be thinking, “How on Earth was it ever OK for advisors to NOT operate with their client’s best interest in mind.” John Oliver thought the same thing as made clear in his June 2016 airing of “Last Week Tonight” (Warning: contains vulgarities). The explanation for this comes down to what’s called the suitability standard, which has been the operable requirement thus far. Under this standard, those giving financial advice must make recommendations that fit the client’s personal situation, but does not necessarily require the advice to be in the client’s absolute best interest.

Think of it in terms of buying a car. Your family is best served by a bigger car that does well in the winter. Ford and Chevy both have models that are suitable to your needs, but the Chevy is a little more expensive and lacks a few features. This makes Ford’s model the best option for you and your family. A Chevy salesman clearly benefits by the commission of selling you a Chevy vehicle. Under the suitability standard, the salesman could sell you their Chevy without mentioning the Ford. The salesman can do so under the premise that the Chevy is still suitable for your family. Under the fiduciary standard, the salesman must disclose that the Ford is likely the best option for your family’s situation and needs.

The fiduciary terminology is becoming more and more commonplace as we approach the DOL’s new ruling, which goes into effect on June 9th (delayed from April 10th). The actual ruling itself is 1023 pages long! The following are the most important things you need to know and do.

What Do the New Regulations Mean for Me?

Ask your current advisor the following questions:

  • Are you a fiduciary? If the answer is no, you should ask many more questions in order to fully understand the ways in which your best interests may have been compromised. Specifically, uncover more about how your financial advisor is compensated and what commissions they receive as a result of selling specific products.
  • How will the new DOL rule affect your financial plan? Commission based financial advisors may see that big changes are needed to your financial plan in order to comply with the new DOL standards. Meanwhile, very nominal changes are likely for plans advised by fee only advisors, like Wacek Financial Planning, that have always been fiduciaries.
  • Does this new rule apply to all accounts?  Interestingly, no – it only applies to retirement accounts.  While the new DOL rule is a great start, it doesn’t go far enough.  It’s a little like a doctor who has only committed to acting in a patient’s best interest on half of their body.  However, while it’s true that financial planners will only be required to be fiduciaries on retirement accounts, as a fee only Registered Investment Advisor, Wacek Financial Planning has voluntarily agreed to serve as a fiduciary on ALL accounts.
  • What are your credentials? Anyone can adopt the title of financial advisor, representative, and broker. Let’s take a look at how you can make sure you have an advisor that is uniquely qualified to serve you.

Finding the Right Advisor

If you were to Google search "How to find a financial advisor" the number one result is this article published by the Wall Street Journal. The author of the article recommends seeking out a financial planner who is: (1) a Certified Financial Planner or CFP® (2) part of the National Association of Personal Financial Advisors, and (3) a fiduciary. Wacek Financial Planning is all three. This is reason enough to consider working together, but there is even more.

Held to the Highest Standard

Wacek Financial Planning has been a fiduciary since it began in 2014. For our clients, the only change as a result of the new ruling is that we will now provide additional documentation summarizing any advice given. While all of these things should give clients confidence, there is an even greater standard to adhere to.

I believe that I, Ben, am accountable to God in the way that I serve my clients and run my business. I take to the fact that as a Christian I represent Christ through my work. My goal is to bring Him glory in the work that I do. One of the main ways I can do that is by serving my clients transparently, honestly, and always with their best interests in mind.

Are you looking for a financial advisor with experience as a fiduciary who holds themselves to the highest standards? Wacek Financial Planning is always glad to meet new individuals and families looking for the right advice for their unique circumstances. With important changes in the industry, it is even more important now than ever before that you have the right person looking out for you and your finances.

About Wacek Financial Planning

Founder, Ben Wacek, is a fee-only, Certified Financial PlannerTM who has a passion to help people of all income levels make wise financial decisions and steward their resources from an eternal perspective, using Biblical principles.  If you’d like to learn more about Wacek Financial Planning, please visit www.wacekfp.com.

 

Photo courtesy of Ben White of Snap.io

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