We believe that Fiduciary Duty and Independence are central components of the advisor/client relationship. Two recent events have highlighted and strengthened this belief.
The first was the issuance of the new Department of Labor “Fiduciary Rule” for Financial Advisors. For years, the financial services industry and their regulators have been arguing over one simple question:
Should Advisors be legally required to act in their client’s best interest?
Most investors are shocked to learn that the answer to this question was "No". They naturally and rightfully assumed that their adviser should already be required to act in their best interest. For the vast majority of advisers, this is not the case. Unfortunately, the new rule did little to clarify the situation.
Secondly, a new study of advisor misconduct from the University of Chicago illustrates why the new DOL Fiduciary Rule did not go far enough. The study1 clearly shows that in the absence of a true fiduciary standard, many advisors are not acting in the best interest of their clients. Rather they are acting in the best interest of their firms and/or themselves.
1 “The Market for Financial Advisor Misconduct”; University of Chicago; Egan, Matvos, Seru
We think investors deserve better!