July 26, 2017

Many of you may have seen a TV ad The Financial Planning Association Board of Standards has been running titled “Can You Tell the Difference? in which a series of clients interview with an advisor – who turns out to be a disk jockey with no prior financial experience.


View it at: www.youtube.com/watch?v=e_Ql_7NCk0o

While this may be an extreme example made to illustrate a point, the reality is that anyone can call themselves a financial advisor. No credentials required.

Certified Financial Planners (CFP®) and Certified Public Accountants (CPA) have long sought to professionalize the financial advising sector by adopting clear educational, practice and ethical standards that protect the public from those who seek to do harm. Yet, less qualified and less ethical practices still thrive.

The Rationale behind the "DOL Fiduciary Rule":

In an effort to further protect consumers, under the Obama Administration, the Department of Labor (DOL) developed the "Fiduciary Rule", targeting anyone who provides investment advice and/or management of Employee Benefit plans and IRA’s for a fee or other direct compensation. The intention of the Rule is to require such persons to act in their client’s best interest and not their own.

The rule primarily targets this one area and many CFP® and CPA professionals feel that it does not go far enough to protect consumers from advisors who are more concerned with their bottom lines than with their clients’ welfare.

The Current Status of the "Rule"

The "Fiduciary Rule" was originally scheduled to take effect in June 2016 but was delayed until June 2017, with full compliance and implementation to be completed by January of 2018.

The latest news however, according to Investment News’ Fiduciary Focus blog written by Mark Schoeff, Jr., is that the House Education and Workforce committees voted on July 19, 2017 to repeal the legislation and replace it with an "advice standard" based on disclosure that is titled "The Affordable Retirement Advice for Savers Act". In addition, the House Appropriation Committee also voted to include a rider in the DOL funding bill for fiscal 2018 that would prevent the agency from enforcing the Fiduciary Rule.

Both of these measures now pass on to the Congress where they are expected to pass in the House, though passage is less certain in the Senate. Consumer groups are lobbying for implementation of the original DOL Rule. Further changes to the "Rule" or to the "Affordable Savers Act" may yet occur as they move through the legislative process.

SFSG's Position:

According to Investopedia, a “fiduciary’ is a person or organization that owes to another the duties of good faith and trust.

Being a fiduciary is the highest legal duty of one party to another and also involves being bound ethically to act in the other's best interests. A fiduciary might be responsible for general well-being, but often it involves finances – managing the assets of another person, or of a group of people, for example. Money managers, bankers, accountants, executors, board members, and corporate officers can all be considered fiduciaries.”

As a Registered Investment Advisor, we are required to operate as fiduciaries under the Investment Advisors Act of 1940. This was the first United States federal legislation that sought to monitor and regulate the activities of investment advisors in an effort to protect the consumer.

Under this Act, SFSG has the obligation to:

1. Always act in the interest of our clients. We provide advice and guidance that is in your interest only.
2. To our best abilities, we provide full and fair disclosure of all relevant facts to our clients and prospective clients.
3. We employ all reasonable care to avoid misleading our clients.
4. SFSG operates with the intentions of providing undivided loyalty and utmost good faith.
5. We do our best to avoid conflicts of interest that can impact the impartiality of our advice. Any conflict of interest is identified and full and frank disclosure is made.

In addition, we adhere to the fiduciary and ethical standards of the CFP® and CPA professions.

We will keep you informed of any further changes or issues that may impact you as a consumer. Regardless of the outcome of the federal legislation, Shapiro Financial Security Group has always, and will always, adhere to the highest standards possible.

Please feel free to contact us at 732-739-8991 with any questions or concerns you may have.