The spring 2019 Morningstar magazine had an interesting article indicating brokers took notice of the fiduciary rule and acted. The article titled “Are Brokers Acting in Their Clients Best Interest,” by Authors Jasim Sethi and Aron Szapiro, studied data linking broker pay and their eventual recommendation of mutual funds. Sethi and Szapiro noticed that the Department of Labor Fiduciary Rule was long coming but short-lived and seemed to change brokers behavior for the better. The news stories regarding client’s best interest and the run up to the implementation of the fiduciary rule, coupled with the significant preparations by the brokerages themselves for its implementation, probably helped curb the excesses by the brokers.
The study in Sethi and Szapiro’s article seemed to confirm this. Brokers started to recommend lower cost funds. The transparency caused by the media coverage seemed to shape behavior even before the rule became effective in 2017 and then was struck down in the spring of 2018. It’s unknown whether this self-restraint by the brokers will last. The Securities and Exchange Commission has proposed a new rule called Best Interest, addressing standards of conduct in April of 2018 and it has yet to be implemented.
We at Skyline have long held that the fiduciary standard of care is central to how we do business. We believe the legal obligation to put the client’s interest ahead of our own, eliminate conflicts of interest where possible, and if not possible, draw our client’s attention to the conflict should be the law for all who give advice.
Mark Logan CFP® is a financial advisor at Skyline Advisors, a locally owned and operated Registered Investment Advisor providing money management and financial planning services. Skyline Advisors is located at 405 32nd St., Ste 201 in Bellingham and also at www.myskylineadvisor.com
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