Fiduciary rule should raise awareness of more important issues

Posted on Posted in Financial Planning, Investment, News and Politics

I have mixed feelings about the new federal push in retail financial market known as the “fiduciary rule”. Depending on the specific facts, there is a strong argument to be made on either side of the issue. One thing that is certain, however, is that the new rule is intended to increase public awareness of the value of unconflicted advice. Yet the nature of the investment management industry has changed so much that this effort might have little practical effect on the market.

For decades I worked exclusively as an independent Registered Investment Adviser but today’s technology allows me to do that same job for a small fraction of the time. As a result, the amount of work needed to steer clients into good investment choices is so small as to be an inconsequential part of my work. Yet I’m not certain this is actually proven to be a good thing. Investors tend to place little value on services they get for free (or almost free). It is easy to take for granted and dismiss the benefits of simple and commonplace investments.

My stance remains the same: investment advice and investment performance is only a small piece of the puzzle of overall financial success. In fact, this accounts for only a small portion of our overall financial results. Other issues like managing risks, rebounding from an unexpected life crisis, minimizing taxes and managing medical expenses all play a larger role for most of us. An adviser who can play a quarterback role in coordinating multiple issues and utilize low cost/high efficiency technology is worth more to most of us than one who is focused only on managing investments.

Some other recent coverage that reaches the same basic conclusion:

http://www.barrons.com/articles/new-fiduciary-rule-is-hardly-a-pox-on-advisors-1460068989

http://www.usatoday.com/story/money/personalfinance/2016/04/05/fiduciary-ruling-investor-adviser-advisor/82655312/

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