Your new financial adviser has a well-decorated office, a firm handshake, and a bright smile. After an hourlong meeting, you leave with what you think is a state-of-the-art investment portfolio. You feel financially secure, taken care of.
Each time, Shaffer did her own research. She took classes, pored over dense account statements, and generally did the work she was paying her adviser for. “You have to keep watching everything. You’re very vulnerable,” said Shaffer, who retired three years ago after a career in the pharmaceutical industry. “Nobody really had my interests at heart.”
Consumers like her say that’s the real problem: Many financial advisers just don’t care what’s best for you. But with an industry awash in misconduct, the bigger issue may be that they aren’t required to care.
You’d be forgiven for assuming your relationship with a financial adviser carries the same sort of solemnity as, say, attorney and client or doctor and patient. An attorney is bound to zealously represent you; a doctor pledges to do no harm. So why aren’t financial advisers subject to the same duty? Well, the economics of the industry—fees, commissions, quotas—can end up standing in the way.
The Fiduciary Rule, finalized under Obama and originally set to take effect earlier this year, seeks to cure this disconnect. All advisers were to be required to put clients first when handling retirement accounts, where the bulk of everyday Americans’ savings reside. But then Donald Trump won the election, and on his 15th day in office, the Republican president ordered the Department of Labor to reconsider the rule. His advisers echoed Wall Street arguments that tying the hands of advisers would limit investor choices, raise the cost of financial advice, and trigger a wave of litigation.
This Friday, the rule will take partial effect. Its future, though, remains deep in doubt. Many Republicans in Congress oppose it, and Labor Secretary Alexander Acosta has suggested that at the very least it be revised. Then last week, Trump’s newly appointed chairman of the Securities and Exchange Commission, Wall Street lawyer Jay Clayton, announced his agency would also seek comment on the topic, a process that could further threaten the rule’s survival.
Read the full article at Bloomberg: Why You Still Can’t Trust Your Financial Adviser | Bloomberg