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The Easter Bunny and the Fiduciary Standard

Written by Kevin Painter.

My two-year old daughter was thrilled when she woke up on Easter morning to find out that the Easter Bunny had visited our house.  She’s enjoyed the new toys and dress up clothes that were left in her basket.  She doesn’t realize that those gifts actually came from her parents via Target and Amazon.com, not from Peter Cottontail.

It’s the same feeling for many investors who think they are getting advice with their best interests in mind, when they are actually being sold a product by a salesman.   Those advisers that are held to a fiduciary standard( which means acting in the client’s best interest and avoiding any activity that can present a conflict of interest) is much different than the majority of investment brokers and agents that are only held by a suitability standard.  As Carl Richards writes in his blog explaining the differences between advisers and salespeople,

“We would never expect a Toyota salesperson to send us to the Honda dealership if a Honda were better for our family.  We know when we walk into the dealership that they are going to try and sell us a Toyota, and we’re prepared to protect our own interests.”

From Carl Richards Bucks Blog @ NYT

Unfortunately, too many investors falsely believe that they are getting that same level of advice from their broker.  More options exist now for investors than ever before.  There are numerous advisory firms, such as LeConte Wealth Management, that are able to provide fiduciary, fee-only advice to clients in the areas of asset management, financial planning and retirement plan consulting. The rules may not yet be changing for individual investment advice, but retirement plan sponsors are seeing sweeping fiduciary changes in 2012.  Substantial regulatory changes later this year will require brokers to clearly state the fees that they charge for their services to plan providers and disclose whether or not they are acting as a fiduciary to those plans.   This has potential to transform the retirement plan industry and has already forced many insurance and mutual fund companies to get out of the business rather than face higher standards.

After the market dives and massive losses in 2008, there is a push in Washington and on Main Street for independent, fiduciary counsel to help investors meet their individual goals.  Perhaps this spring, as the flowers bloom and the days grow longer, it may be time to look for advice from someone that puts your goals and objectives first.  That exercise may cause you to stop believing in the Easter Bunny.