01 Jun

DOL’s Fiduciary Rule Goes into Effect on June 9

Grant Blindbury

Grant Blindbury

Grant Blindbury has been working in the Investment Advisory industry since 2003 managing assets of affluent individuals and pension plans. Grant earned his bachelor's degree in Business & Economics at the University of California at Los Angeles (UCLA) in 2001. Grant specializes in working with clients approaching or entering retirement and positions them for success by coordinating their most important financial affairs. Grant's goal, as his client’s personal CFO, is to deliver both the financial outcome and experience necessary to accomplish their most important goals. In 2007, Grant earned the professional credential CERTIFIED FINANCIAL PLANNER™ (CFP®). He is president of his local Estate Planning Council and participates in multiple professional learning groups. He is on the Board of Directors for Big Brothers Big Sisters of Ventura County as well as being a “Big” himself. From the outset he was drawn to the client-centric model that fee-based advisory services provided and joined forces with Fields Financial Associates, Inc. He would later partner with the founders of Fields Financial Associates to form FMB Wealth Management. He has been a licensed Investment Advisor since 2003.
Grant Blindbury

After a 60-day delay from its original schedule, the Department of Labor’s (DOL) fiduciary rule – an investor-protection law created under the Obama administration – is now set to go into effect on June 9, 2017. Many investors are wondering how, if at all, this rule will weigh on their portfolio as well as their relationship with their investment professionals. To answer this question, let’s take a closer look at the fiduciary rule, who it affects, and how it changes existing legislation.

What is the New Fiduciary Rule?

In 1974, the DOL issued the Employee Retirement Income Security Act (ERISA), which set forth rules and guidelines for all qualified retirement plans and defined the term “fiduciary”. Fiduciaries – those who exercise discretionary authority or control over a plan’s management or assets — are responsible for acting in the best interest of the clients whose assets they manage in accordance with a guideline known as the “prudent person standard of care”. This guideline requires fiduciaries to disclose all conflicts of interests and fees they collect that result from commissioned or third party transactions and act in the best interest of their clients, not their own self-interest.

Under current legislation, not all financial professionals who work with retirement plans or provide retirement planning advice are bound to the level and scrutiny of fiduciaries. Currently, financial advisors need only adhere to the “suitability” standard, which means they only had to determine if an investment recommendation met a client’s defined need and objective. Because of this lower standard, salespersons could profit by steering clients toward specific investments – such as ones with higher sales commissions – whether or not they are in the best interest of their client.

Who does this new rule affect the most?

The new fiduciary rule expands on the definition of a fiduciary and extends the fiduciary standard to include individual retirement accounts (IRA).  Under the expanded definition, all financial salespersons such as brokers, planners, and insurance agents who are normally compensated with sales commissions will now be deemed as fiduciaries who must adhere to a higher level of accountability and scrutiny when working with qualified or individual retirement accounts.  Under the new fiduciary rule, fees and commissions from the sale of specific investment products will be more transparent to clients and more heavily examined by regulators to ensure products are sold based on the best interest of the client. The new rule may eliminate many commission structures that are widespread in the industry.

Broker-dealers and insurance companies will be most affected by the new DOL rule because many of their salespeople are still compensated through commissions from investment products. These companies will now have to enter into new disclosure agreements with their clients known as Best Interest Contract Exemptions (BICE). The BICE exists in order to notify clients that there may be a potential conflict of interest regarding a salesperson’s investment recommendation, as well as disclose commissions made off of a sale.

FMB Wealth Management advisors are registered investment advisors (RIAs) who already adhere to this fiduciary standard in accordance with the U.S. Investment Advisors Act of 1940, which requires our advisors to eliminate or disclose all conflicts of interest when advising clients. We have always put our clients’ best interests ahead of our own profits and self-interest. With or without federal obligation, these commonsense ethics have always been a part of our practice. Our clients’ financial well-being is our highest priority, and we pride ourselves on always putting our clients’ best interests first.

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