Iโve been writing to you for years about the difference between the fiduciary and suitability standards (Read here, here, and here for starters). A fiduciary standard requires an advisor to look out for your best interests, whereas a suitability standard does not. The first question you should ask any serious investment advisor is, “Are you required by law to follow a fiduciary standard?” Judging by this article from The Wall Street Journal, the idea is finally catching on with investors.
The Labor Departmentโs new fiduciary rule is set to start being implemented in April and is expected to affect more than $3 trillion of retirement assets in the U.S.; it requires financial advisers and brokers to act in the best interests of their clients when dealing with retirement accounts. It doesnโt affect nonretirement accounts.
The ruleโs goal is to prevent brokers from operating under the โsuitabilityโ standard of conduct, which allows brokers to recommend investments that pay them the highest sales incentives.
Since the governmentย cleared the fiduciary ruleย this past April, the concept has had something of a star turn. A number of financial-services firms have started featuring the termโor its definitionโin their marketing campaigns.
The concept was the unlikely focus of an episode of HBOโs โLast Week Tonight withย John Oliver,โ a popular news-satire show that airs on Sundays.
โGenerally, it is currently legal for financial advisers to put their own interests ahead of yours, unlessโand this is interestingโthey are whatโs called a โfiduciary.โ Because not all financial advisers are bound to act in your best interest, but fiduciaries are, which is a bit weird,โ Mr. Oliver explained. More than 11 million viewers have seen the episode.