Acting In the Client’s Best Interest

by | Feb 28, 2018 | Asset Management

Should acting in the client’s best interest be a requirement of all brokers and advisors?

This topic stresses that individuals realize the differences between brokers and advisory firms, and the differences between “financial advisors” and “investment advisors.” There are important differences!

Many investors believed “always acting in the client’s best interests” already WAS the case, that their broker already had a requirement to do so.*  However, the Department of Labor regulations, enacting this “fiduciary standard of care,” was delayed by the Trump administration. And some in the industry feel this fiduciary rule may get pushed off the table entirely. For now, the DOL regulations are slowly being implemented. Full implementation does not take effect until mid-2019.Client's Best Interest

However, Maryland has jumped ahead of the federal government when it comes to implementing the DOL changes. Perhaps tiring of waiting for a common-sense practice to be implemented, Maryland (and soon – possibly – other states) are moving ahead now with potential legislation to protect the client’s best interest.

FSI (the Financial Services Institute), representing broker-dealers and financial advisers (not investment advisors like Mullooly Asset Management), opposes the fiduciary-duty provision of the bill.

Other states, including New Jersey, are also working on similar legislation to protect investors. The proposed NJ legislation would mandate that financial advisors disclose to customers they are not a fiduciary, and therefore not required to act in the client’s best interests.

Clients of New Jersey brokers and financial advisors would (if enacted) be required to be given a form stating, in plain language, “I (your advisor) am not a fiduciary. Therefore, I am not required to act in your best interests, and am allowed to recommend investments that may earn higher fees for me or my firm, even if those investments may not have the best combination of fees, risks, and expected returns for you.”

How do you think that will go over?



*TD Ameritrade survey of 1,000+ U.S. investors conducted by Penn, Schoen & Berland Associates

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