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Legislative Advocacy

Fiduciary Standard Under Fire: Views from Megan Leonhardt and Jack Otter

This week on "Better Off," host Jill Schlesinger speaks with MONEY's Megan Leonhardt and Barrons' Jack Otter to try and help make sense of the DOL's fiduciary rule.

Articles by Jill Schlesinger

By Jill Schlesinger, CFP®
  |  Published: February 2, 2017

This article originally appeared on Jill Schlesinger’s LinkedIn.

Fiduciary Definition, according to Merriam-Webster:

  1. a : held or founded in trust or confidence <a fiduciary relationship> <a bank’s fiduciary obligations>
  2. b : holding in trust
  3. c : depending on public confidence for value or currency <fiduciary fiat money>

Fiduciary is a weird legal word that has become a lightning rod from Wall Street to Washington, D.C. In a nutshell, fiduciary is the standard of care that requires financial professionals to put the interests of their clients’ first. Seems like a pretty obvious and basic principle, that should be the standard when someone is talking about your money, right?

Megan Leonhardt of MONEY Magazine

Well, you may be surprised as to learn that the majority of the financial services industry has long been held to a lower standard, which was called “suitability.” Suitability meant that any financial product that was sold had to be appropriate for you, though not necessarily in your best interest. The problem is that most investors have been unaware of the different standards that have applied for all of these years.

Enter the Department of Labor (DOL), which in the aftermath of the financial crisisand in conjunction with the Obama administration—began working on a way to incorporate elements of the fiduciary standard to those who provide retirement services to American investors.

After a lengthy comment period and lots of negotiation with the financial services industry, new DOL fiduciary rules are scheduled to begin implementation on April 10. These rules are intended to help protect investors by requiring all who provide retirement investment advice to plans, plan fiduciaries, and IRAs to abide by a “fiduciary” standard, putting their clients’ interest first.

Jack Otter of Barrons

Financial service companies large and small had made big plans to comply with the new rules, but that was before the election of President Donald Trump. It is now widely expected that Trump, along with Congressional Republicans, may delay and perhaps kill portions of the proposed DOL rule.

As you can see, it’s a complicated issue. It shouldn’t be, but it is. That’s why we brought in Megan Leonhardt from MONEY Magazine and Jack Otter from Barrons to try and help us make sense of it all. With implementation day rapidly approaching, if the government takes the position that the fiduciary standard is not important, you may want to ask yourself this question: If a broker or salesperson doesn’t want to put you first, why should you work with them?

I would love to hear your feedback on this thorny issue. You can always reach us via email at askjill@betteroffpodcast.com.

The opinions stated on the Better Off podcast are those of the host, Jill Schlesinger, and her guests, and not those of Betterment or its employees. Any third-party links provided are offered as a matter of convenience and are not intended to imply that Betterment endorses, or is affiliated with the owners of or any information contained on those sites, unless expressly stated otherwise. Listen to a preview and subscribe to “Better Off” here.

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