Why is the term ‘fiduciary” important? In effect, if someone is your fiduciary, they are always acting in your best interests. They are ethically bound to operate for you under good faith and trust. They put your financial interest above their own. A fiduciary must prudently take care of your money or other assets.
While most financial advisors already act with the best intentions of their clients, the issue get a little gray when “conflicts of interest” are concerned. A conflict of interest arises when a person can derive personal benefits when acting in an official capacity. For example, an advisor may work for a firm that offers its own internal investment products. At what point should the advisor disclose to you the various costs and compensation differences between those of their internal products versus those that can be obtained elsewhere?
New Law Regarding Financial Advisors & Retirement Benefits
The Department of Labor issued a new ruling, effective June 9, 2017, on how financial advisors must interact with any clients involving employee retirement benefits. This new rule deems any financial advisor that gives investment advice for an ERISA covered vehicle to be a “fiduciary.” This can include brokers, registered investment advisors, and insurance agents. For example, a fiduciary would be someone who sells you an annuity that retirement funds are moved into and anyone who helps transact a rollover from your 401k to an IRA.
If something goes wrong with your employee benefit plan assets, a fiduciary can be held personally liable to restore any losses to the plan if it is found that they operated improperly. Courts can also take whatever action is appropriate, including removal, for any plan fiduciary who breaches their responsibilities.
Most people work with advisors they already trust and, therefore, will see little or no impact from this new rule. However, it is good to know that the increased protections are in place to prevent problems from happening and various legal remedies are available if the worst does occur.
Choose Punta Gorda Financial Planning as Your Charlotte County Fee-Only Financial Planners
Our firm, Punta Gorda Financial Planning, is an SEC regulated Registered Investment Advisor. We take our fiduciary responsibility very seriously. We strive to provide the best possible, objective advice designed to meet our clients goals. Our Code of Conduct and Ethics is the foundation of our relationship and will make sure any conflicts are disclosed to you in writing. We value your trust! Give us a call or contact us online if you have any questions on what this DOL ruling means to you.
Written by Thomas M. Geier, CPA, CFP®, PFS.
My aim is to offer clarity to your finances. I specialize in helping individuals and families determine what is most important in their financial lives, identify short and long-term goals, and make great choices for achieving comfort, security, and peace of mind.
I graduated from Loyola University in Baltimore, Maryland, and have been a Vice President of our investment management affiliate, Geier Asset Management, Inc, since its founding in 1999. I have over 25 years' experience in financial planning and investment management and am licensed as a Certified Financial Planner® professional, a CPA, and Personal Financial Specialist. I am member of the Personal Financial Planning section of the American Institute of CPS's and Florida Chapter of the Financial Planning Association.