Only Scammers (no disrespect intended) Allowed By: Gabriel PotterMBA, AIFA® 2020.08.18

Back to basics.  We are putting aside investment, economy, and COVID-19 news for a week and focusing on our core principles:  fiduciary duty. 

As a reminder, fiduciary duty is the obligation to work in another party’s best interest.  It is the cornerstone of our business here at Westminster Consulting, and we have been promoting it throughout our industry whenever and wherever we can.

A few years ago, we thought that the Department of Labor (DOL) was going to expand the scope of the fiduciary standard across much of our industry, and we applauded this move.  However, over the past few years, the application of the fiduciary rule had been delayed, reviewed by the US Court of Appeals, amended to include best interest provisions, and eroded to a shell of its original intent:  to put customers first.  Finally, on June 29, 2020 – the DOL proposed additional exemptions for the fiduciary duty for brokers and other financial advisers.  In other words, the people most frequently associated with conflicted business practices are getting a free pass to continue operating as usual.  Brokers can continue to advise for rollovers and shady investments, because the amended rule exempts them from putting their clients first.  At this point, the fiduciary rule guidelines have been rendered almost completely meaningless.  The original spirit of the law has almost no remaining impact on the current letter of the law. 

None of this changes the ethics and efficacy of fiduciary principles.  What it does mean is that brokers and advisers who have behaved poorly in the past, have no incentive to change.  As much as ever, investors (both individuals and institutions) should be looking for advice from a fiduciary.  The long hoped for expanded legal protections are not happening. 





Gabriel Potter

Gabriel is a Senior Investment Research Associate at Westminster Consulting, where he is responsible for designing strategic asset allocations and conducts proprietary market research.

An avid writer, Gabriel manages the firm’s blog and has been published in the Journal of Compensation and Benefits,...

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