What is this whole fiduciary thing and why is it important?
Overhear the word “fiduciary” from across the room and you might think someone’s throwing around off-color insults. The Urban Dictionary definition isn’t exactly a term of endearment, but the real meaning with regard to your finances is pretty simple: A fiduciary is someone that is working for YOU and puts YOUR best interests ahead of their own (or their firm’s), at all times.
Believe it or not, this is not a requirement for the vast majority of the big brand name institutions in the financial services industry. Nearly anyone can call themselves a financial advisor in some form or another, but that doesn’t mean the “advice” they are providing is anything but conflicted. And what does this mean to you? It means money in the form of fees going into your advisor’s pocket instead of your portfolio.
You may have heard about the latest update to the fiduciary rule, released last week by the Department of Labor (“DOL”). It’s been anticipated for quite some time now and has had most of the industry pretty freaked out that they may have to change their entire business to start acting in their clients’ best interests. For Registered Investment Advisor firms like blooom, which always has been and always will be a fiduciary, a stricter standard on the industry as a whole was something we were pretty excited about. After all, one of the reasons our founders created blooom was to disrupt the industry and shine a light on the largely ignored segment of our population that truly needs non-conflicted advice from someone they can actually trust.
Good or bad, the end result of the new DOL rule thus far has left the non-fiduciary side of the industry breathing a huge sigh of relief, and even popping champagne I would imagine, since the rule is not nearly as strict and comprehensive as originally intended. But regardless of the impact the new 1,000+ page rule (yawn) will or won’t have on the industry and you personally, the good news is that all of this shines a bright light on a pretty important problem and a question that every investor must ask before trusting any professional with their hard earned money – How do I know my advisor is truly looking out for me and my family?