Home Adviser Fund Update Is Your Adviser a Fiduciary? Published May 5, 2017 The Future of FiduciaryA person or organization who manages assets for a third party, and is legally bound to act in the best interests of that third party, putting the third party’s interest before their own. Rule in Doubt As we covered last year, in April 2016, the U.S. Department of Labor issued regulations that would legally require financial advisers and stockA financial instrument giving the holder a proportion of the ownership and earnings of a company. brokers to act in the best interests of their clients investing for retirement—what’s known in the industry as “fiduciaryA person or organization who manages assets for a third party, and is legally bound to act in the best interests of that third party, putting the third party’s interest before their own. duty.” In February, President Trump issued a memorandum asking the Department of Labor to delay implementation of the so-called “fiduciary” rule in order to reassess its impact on businesses and retirement investors. This has resulted in the rule being delayed by two months from April 10 to June 9 this year (there has been lobbying from industry groups to further delay the rule). Among the Trump administration’s concerns: Will consumers have reduced access to financial advice? Is the rule overly disruptive to the financial services industry and will it cause litigation to increase significantly? We don’t have the answers to those questions, but Adviser Investments has followed the Investment Advisers Act of 1940’s fiduciary standard for all of our clients’ investments, not just those earmarked for retirement, since our founding in 1994. As implementation looms and a couple of high-profile presidential appointments (Secretary of Labor Alexander Acosta and Jay Clayton as chairman of the Securities and Exchange Commission) have been queried on the measure during their confirmation hearings over the last couple of weeks, the fiduciary rule has garnered a lot of space in the media. We thought a quick overview into what it means would be informative for retirement-savers hunting for a financial adviser for the first time or thinking about a change. The Supreme Court ruled in 1963 that all investment advisers, as defined under the Investment Advisers Act of 1940, had to follow a fiduciary standard—acting in clients’ best interests—across all types of accounts. However, brokers were not held to a fiduciary standard and this remains so today. The new rules extend that obligation to cover how all advisers—including stock brokers and insurance sellers—are compensated (specifically aimed at curbing fees and conflicts of interest) for working with clients who are investing for retirement. The fiduciary rule applies to all financial products that could be used in a tax-advantaged account, and is intended to protect Americans saving for retirement from unscrupulous investment professionals more concerned with their own financial gains than those of their clients. It’s a way to prevent (or, at least, disclose) conflicts of interest where an adviser might have a financial incentive unrelated to their clients’ investment objectives to direct clients into one fund or annuityA financial instrument that pays the holder a guaranteed stream of payments. The annuity is funded by either a lump sum (one-time) or a series of deposits. Once funded, the sum is invested by the insurance company who sold the annuity (the accumulations phase). After a certain trigger (for example, the holder’s retirement or reaching a certain age) payments begin to be issued to the holder (annuitization phase). Annuity payments may be fixed or variable in both amount and in length (some pay out for a designated span of years, others until the holder’s death). rather than another, something that previously might’ve been hidden in the fine print of a contract, if disclosed at all. If enacted as written, the law is likely to accelerate the transition from commission-based financial advice to fee-based accounts. (Adviser Investments is way ahead of the curve on this rule. Since inception, we’ve been a fee-only investment adviser. We don’t take money from fund or insurance providers or anyone else to sell their products. We only get paid by our clients.) According to the fiduciary rule, starting January 1, 2018, brokers and advisers can no longer earn commissions (or engage in other practices on behalf of a client where conflicted advice might occur) without a best interests contract in place. This is a document signed by both the retirement-focused investor and the financial adviser upon opening an account allowing that the adviser may earn “reasonable compensation” so long as they act in the “best interests” of the client, providing disclosure and transparency about all recommended products and compensation involved. (One might argue that these agreements are in fact a way of skirting the new fiduciary rules by getting investors to agree to practices that may not actually be in their best interests up front.) Finally, it’s important to note that the required fiduciary duty only applies to retirement accounts, which receive special protection under federal retirement and employee benefits law. As for investors in non-retirement accounts, without the Securities and Exchange Commission taking action, they remain on their own in determining whether a financial adviser is working in their best interests. If you fall into this category, we’ve created a checklist of sample questions to ask an adviser to get a feel for whether or not they are a good fit for you. At Adviser Investments, fiduciary duty is at the heart of everything we do in our partnerships with clients. We firmly believe that investors are best served working with a trusted professional financial adviser with the experience to help them grow and protect their wealth over time. As mentioned above, we are completely independent of Fidelity, Vanguard and all of the other fund companies we invest with. Our first and only loyalty is to our clients. We’re glad that the new regulation may end up holding the rest of the industry to a similar standard, but if we were faced with a choice between an adviser who is being compelled to work in our best interests and one who has done so on principle for decades, we know which we would pick. If you’d like to learn how Adviser Investments could work in your best interests, please call us at 1-800-492-6868 or email us at firstname.lastname@example.org. About Adviser Investments Adviser Investments is a full service wealth management firm, offering investment management, financial and tax planning, managed individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trustsA legal document that functions as an instruction manual to how you want your money managed and spent in your later years as well as how your assets should be distributed after your death. Assets placed in a trust are generally safe from creditors and can be sold by the trustee in short order, avoiding the lengthy and costly probate process., institutions and foundations since 1994, and have more than 3,500 clients across the country and over $6 billion in assets under management. Our portfolios encompass actively managed funds, ETFsA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index., socially responsible investments and tactical asset allocation strategies, with particular expertise in Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. Our minimum account size is $350,000. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868. This material is distributed for informational purposes only. The investment ideas and expressions of opinion may contain certain forward-looking statements and should not be viewed as recommendations, personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed. Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged. Past performance is not an indication of future returns. The tax information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. We do not provide legal or tax advice. 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