There has been a lot of talk and media coverage during the past couple of years in the financial services world about fiduciary standards due to a regulation proposed by the Department of Labor in 2016. This ill-fated rule which met its official demise in June of 2018 required that anyone giving financial advice on a retirement account, be it an IRA or a workplace 401k/403b, be required to adhere to a fiduciary standard.
What is a Fiduciary?
A fiduciary acts in the best interests of their client. Period. If financial or investment advice is given, that advice must be justifiably in the recipient’s best interest. As an SEC Registered Investment Advisor, Briaud has always legally been held to this standard for advice of any kind. But most “financial advisors” out there are in fact brokers or life insurance salesmen.
Brokers and life insurance salesmen traditionally have been held to the “suitability” standard. Suitability is typically deemed to be advice that meets the suitability requirement for the investor, but is not required to be in the best interest of the client. This is a far cry from a full fiduciary standard, which would prohibit advisors from considering their own compensation when making a recommendation.
The Department of Labor proposal would have raised advice pertaining to retirement accounts from the suitability standard to the fiduciary standard. Businesses built on commissions would have had to figure out how to transition to an entirely new business model, at least for the retirement accounts they advise on. It would not have been an easy transition. The defeat of the proposal is not so mysterious in this light.
Is Briaud a Fiduciary?
Our firm has always been 100% fiduciary from its founding in 1986, so we were mere observers of the ongoing discussion and of course supporters of the proposed change. We may have had to adjust the way we document some of our recommendations, but we didn’t expect any major operational changes.
We wish we could say we were surprised by the misinformation and vigorous lobbying that contributed to the defeat of the new standard. We believe that while this battle may have been lost the war will be won. In the meantime, we will continue to lead by example. It might take years to happen in full, but a fiduciary standard for all financial advice will eventually happen.
If Briaud Financial Advisors can be of any help, please feel free to contact us.
