Fiduciary Standard Under Fire with Megan Leonhardt and Jack Otter

Jill on Money with Jill Schlesinger

Audacy

Self-improvement, Education, Business, Investing

4.6 • 1.9K Ratings

🗓️ 2 February 2017

⏱️ 35 minutes

🔗️ Recording | iTunes | RSS

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Summary

Fiduciary Definition, according to Merriam-Webster: a : held or founded in trust or confidence b : holding in trust c : depending on public confidence for value or currency Fiduciary is a weird legal word that has become a lightning rod from Wall Street to Washington DC. In a nutshell, fiduciary is the standard of care which requires financial professionals to put the interests of their clients’ first. Seems like a pretty obvious and basic principle, that should be the standard when someone is talking about your money, right? Well, you may be surprised as to learn that the majority of the financial services industry has long been held to a lower standard, which was called “suitability.” Suitability meant that any financial product that was sold had to be appropriate for you, though not necessarily in your best interest. The problem is that most investors have been unaware of the different standards that have applied for all of these years. Enter the the Department of Labor (DOL), which in the aftermath of the financial crisis -- and in conjunction with the Obama Administration, began working on a way to incorporate elements of the fiduciary standard to those who provide retirement services to American investors. After a lengthy comment period and lots of negotiation with the financial services industry, new DOL fiduciary rules are scheduled to begin implementation on April 10th. These rules are intended to help protect investors by requiring all who provide retirement investment advice to plans, plan fiduciaries and IRAs to abide by a "fiduciary" standard, putting their clients’ interest first. (There are exceptions to the new rules, which require advisers and financial institutions to follow certain procedures to avoid being in violation of the new rules.) Financial service companies large and small had made big plans to comply with the new rules, but that was before the election of President Donald Trump. It is now widely expected that Mr. Trump, along with Congressional Republicans, may delay and perhaps kill portions of the proposed DOL rule. As you can see it’s a complicated issue. It shouldn’t be, but it is. That’s why we brought in Megan Leonhardt from MONEY Magazine and Jack Otter from Barrons to try and help us make sense of it all. With implementation day rapidly approaching, if the government takes the position that the fiduciary standard is not important, you may want to ask yourself this question: If a broker or salesperson doesn’t want to put you first, why should you work with him? "Better Off" is sponsored by Betterment. I would love to hear your feedback on this thorny issue. You can always reach us via email at askjill@betteroffpodcast.com. Ratings/reviews matter a lot in the podcasting world...so if you have a free minute, please leave us one in iTunes. "Better Off" theme music is by Joel Goodman, www.joelgoodman.com.

Transcript

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0:00.0	Hi, this is Jill Schlesinger, and you're listening to the Better Off podcast.
0:06.4	On this week's episode of Better Off, we're talking The F Word,
0:10.0	F-word, with Megan Lenhart, writer money magazine and Jack Otter the editor at barons.com
0:16.6	People don't read the fine print people don't understand what they're paying their
0:20.8	advisor how they're paying their advisor, how they're paying their advisor. And so regulation
0:24.3	like this both helps make this more transparent and it also sits there and holds the firms
0:29.8	more accountable. You can spend 10 minutes with consumer reports, walk into a car dealership, and you know, almost as much
0:35.1	as the dealer does.
0:36.1	Okay, when you walk into the doctor wondering whether you have a fernia or you need a hip replacement,
0:41.9	it's not the case. You need that doctor to be acting
0:44.2	in your best interest. Same with a lawyer. You don't know the law, he does. It's also the same with a financial advisor.
0:49.2	All that and more coming up next on the Better Off Podcast.
0:52.6	Welcome to the Better Off Podcast.
0:56.0	We're sponsored by Betterment, the smarter way to invest your money.
0:59.2	I'm your host Jill Schlesinger, and this show is the one that is a little bit different than your usual
1:05.0	money show.
1:05.8	This is an unconventional and entertaining way to look at your money and your life.
1:12.2	Now a bunch you wrote in, and if you want to write us just send us an email
1:16.4	ask Jill at better off podcast.com and you wanted to know why we did not talk
1:22.0	about Dow 20,000. Do you know why I didn't talk about
1:25.1	Dow 20,000? Because it doesn't mean anything. It means nothing. As a matter of
1:30.0	fact, it is really just a number and by the way it's such a lousy index but that's a whole other
	...

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