One of the first actions taken by the new Administration was to rescind the new fiduciary rule for retirement accounts that was to be phased in beginning April 10, 2017, with final implementation by January 1, 2018. The rule was designed to ensure that recommendations by financial advisors were made in the best interests of their clients without any conflicts of interest. That new fiduciary rule was years in development. The Department of Labor proposed the rule on April 20, 2015, announced the final rule on April 6, 2016, and formally published the rule on April 8, 2016. You may be wondering if rescinding the rule will impact your retirement accounts with REDW Stanley.
The Good News
The good news is, there will be no change in the advice and counsel you receive from the professionals at REDW Stanley on any of your accounts. As a Registered Investment Advisor (RIA) regulated by the Securities and Exchange Commission (SEC), we already operate as a fiduciary. Regardless of whether or not the new fiduciary rule is put in place, we will continue as an RIA and fiduciary to all of our clients.
In fact, we have been a fiduciary to all of our clients from the beginning. When REDW Stanley was a twinkle in Virginia Stanleyâ€™s eye, a non-negotiable prerequisite was that the firm would be a fiduciary to its clients. Being a fiduciary means we have a responsibility and duty to our clients to act with loyalty and care. A fiduciary has a legal and ethical obligation to put the clientâ€™s interests first so that any decisions made are in the best interest of the client.
So, what does being a fiduciary mean for our clients?
- We put your needs first. The professionals at REDW Stanley are highly credentialed, with years of experience and initials after our names that testify to the fact that we are held to high professional and personal standards. In other words, when we make any recommendation to further your financial goals and objectives, you can be confident that those recommendations are designed to benefit you and no one else.
- We always act in your best interest. Your financial goals and objectives are always our first priority. We avoid conflicts of interest, but if those do occur, we disclose them immediately. As a fee-only RIA, our fee structure is straightforward and transparent so that you always know what services we are providing and the costs of those services to you.
- We are an independent RIA. Because REDW Stanley is an independent wealth management firm, we provide objective, unbiased guidance based on your financial goals and objectives. We have no obligation or requirement to use or recommend any company or service except those that best fit your financial needs.
Fiduciary Standard vs. Suitability Standard
In the financial services world there are two standards, the fiduciary standard and the suitability standard. It is important to be familiar with and understand the difference between the two.
The suitability standard allows an advisor to recommend an investment product or strategy that is â€œsuitableâ€ for the investor based on the investorâ€™s goals and objectives and tolerance for risk. For example: an advisor has selected two investments that are â€œsuitableâ€ for a client based on the clientâ€™s goals; one pays a commission and the other does not. The advisor might be tempted to recommend the investment that will result in the largest benefit to the advisorâ€™s pocketbook rather than the investment with the lowest cost to the client. Moreover, after a recommendation is made and trades are executed, under the suitability standard the advisor is under no obligation to follow up or continue to monitor a clientâ€™s portfolio.
The fiduciary standard requires that an advisor recommend the investment product or service that provides the greatest benefit to the client, regardless of how the advisor might profit from that recommendation. This fiduciary standard requires a higher level of care and responsibility, whereby any advice provided must be in the best interest of the client. When making a recommendation to the client, the advisor takes into account many considerations, such as whether the fees are reasonable, if there are any conflicts of interest, and whether the investment compliments a portfolio that is properly diversified. Plus, once a fiduciary relationship is established with a client, the advisor is always a fiduciary to that client.
As your advisor, REDW Stanley adheres to the fiduciary standard, and we are confident that this business model of disclosure and transparency is in your best interest. You deserve to have advisors who put your interests first, so you can rest assured that any recommendation we make is designed to help you achieve your financial goals and objectives, and designed with the highest standard of care in meeting your financial needs.
Copyright 2017 REDW Stanley Financial Advisors, LLC. All Rights Reserved. This publication is intended for general informational purposes only and should not be construed as investment, financial, tax, or legal advice.