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Weighing regulators responsibilities against clients expectations

If you’re a Financial Advisor, aren’t your recommendations expected to be in the client’s best interest? Most of you anyway?



Regulators responsibilities vs clients expectations

What do you think about the SEC statement that they will be out with their own Fiduciary Rule in 2017? First off, don’t hold your breath.

What about the SEC saying that their Rule will cover all accounts, including retail? See “First off” above. Besides, if you’re a client with money entrusted to someone else, don’t you expect that their recommendations are in your best interests? If you’re a Financial Advisor, aren’t your recommendations expected to be in the client’s best interest? Most of you anyway?

Look, “Fiduciary” is a label. Regulators like labels. The test is where the rubber meets the road, when the pedal is to the metal, when the race in on… Wait, the Indy 500 is not until the end of May. Enough auto analogies.

Regulators can bring enforcement actions, but don’t expect the Department of Labor to show at your Advisor’s doorstep soon. The DOL depends on client complaints to examine an Advisor, and they don’t have a lot of examiners. The DOL likes process, and forms to file. At least the SEC audits firms and has a website where they invite investors to “check out their brokers and advisors”. They have the staff to see Advisors about every 6-8 years (unless they are recidivist). The SEC likes disclosure That helps a lot, right? How many clients do Advisors have that have read their ADV Part 2 in full or browse the SEC website? How many investors out there have actually read an ADV?

Regulators make money from fines and levies for not following their un-clarified rules. Together, let’s put them out of that business.

Do regulations hamper your investment and financial freedom? Financial advisors say so.

Do regulations hamper your investment and financial freedom? Financial advisors say so. (Source)

Black letter law means nothing until it hits the courts. Nothing. What we call standards of Prudence or a fiduciary standard is decided in the courts. A Fiduciary Rule from any Regulator on the books is a ho-hum. Clients have expectations; Advisors have responsibilities, let’s line them up, hit the starter and go (Sorry, no more auto. Promise.)

For Plan Sponsors, let’s get your documents in order, your service providers lined up (not in an auto raceway), make sure we all know what you and we have to do. Then we do it. Simple? No, I didn’t say that, but it’s critical. We need to do our part to solve the retirement crisis in the country (yes, there is one!). We have a legal, no, a moral obligation to help our employees make the most informed investment choices from the most suitable, cost effective, risk-adjusted return fund vehicle lineup we can. And then, we run it by the book in the cleanest conflict environment possible. Maybe we can help you in this process.

For Financial Advisors, eliminate even the perception of conflict, educate Sponsors and Participants and take more time to do it right. Give your Plan clients, their participants and beneficiaries the “Value of Your Advice.” I know we can help there, too— by detailing for you the premises of THE FIDUCIARY SALE©.

For Participants, the employee benefit plan is supposed to be managed solely in the best interests of not the Plan, but its Participants and Beneficiaries.

DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation in writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.

John is widely regarded as a top legal expert on fiduciary responsibility relating to the investment management profession. A former Banker, teacher and adjunct professor at colleges, including at Wharton, John started his securities representation in 1983, before joining EF Hutton in 1987 where he served as the director of Portfolio Management Programs and General Counsel of the Consulting Group. Later, he started his own law firm, specializing in employee benefit, securities law. In 1995, he co-founded The Lockwood Group of companies, where he served as Chief General Counsel and Corporate Secretary, as well as President of Lockwood Financial Services, Inc. Upon retiring from Lockwood in 2002, John devoted his efforts to Howling Wolf Enterprises, a training company and a publisher of books and articles on Investment and Financial issues as well as fiction. In 2011 with partners known in the Investment management business, he founded The Learning Network, whose mission is to improve Financial Literacy globally for financial professionals and investors. He has authored 14 books on investment management. His current mission is The Ethical Treatment of Somebody Else’s Money, found at In 2010 the Money Management Institute designated him an "architect of the managed solutions industry" awarding him their Pioneer award for Lifetime Achievement in Wealth Management.