Patrick Eng, Financial PlannerThere has been much discussion and news recently about the Department of Labor (DOL) fiduciary rule. The new regulation will require all financial professionals who advise investors on retirement plans and accounts to act in the best interest of their clients. For many investors, it is new information that their financial professional may not be working in their best interest.

Clients of Perspective Financial Services can rest assured knowing our firm has always adhered to the highest standard of fiduciary responsibility in all matters.

Historically, the financial industry has operated under two different standards of care – the fiduciary standard and the suitability standard. The DOL fiduciary rule shines a light onto this subtle, but important, distinction.

The fiduciary standard demands an advisor put every client’s interest first and above the advisor’s own interest. It is required by the Securities and Exchange Commission (SEC) of fee-only, Registered Investment Advisors (RIA). The suitability standard requires only that a broker or registered representative make a recommendation or provide advice that is suitable to a client’s situation, not necessarily best. This opens the door to potential conflicts of interest for advisors working on a commission basis.

These two standards of care have long created a rift in the financial industry, and make it difficult for investors to know if they are being taken care of by advisors who have the investors’ best interests at heart. To further complicate matters, it is possible to encounter a financial professional who is “dual registered,” meaning both fees and commissions are received.

The new law, set to take effect April 10 this year, will require all financial advisors to adhere to the fiduciary standard of care for retirement accounts and plans. Recent news reports, however, speculate the DOL fiduciary rule may face a delay or repeal. Regardless, it’s important that investors understand the difference between the two standards of care and know under which their advisors operate for all their accounts.