The financial industry is on the edge of their seats. The Department of Labor is expected to release new rules which would govern the standard under which financial transactions must comply. Currently, the rules require transactions meet a suitability standard and the new rules are expected to require a fiduciary standard.
The best analogy I have come up with to describe the difference is the way my wife and I pick our outfit for any given day. I dress to a Suitability standard; my clothes will always be functional and should reasonably be expected to get the job done. However, some days my wife or kids look at me and say “That just doesn’t look good on you” or “Your shirt doesn’t match the rest of your outfit”. My wife dresses to a Fiduciary standard; function and appropriateness are givens but she wants every element of her attire to be as perfect as possible. She is only satisfied when she feels there would have been no better choice.
Here at DV Financial, we are not too worried about the new DOL rules because we already adhere to a Fiduciary standard as required by the Certified Financial Planning Board of Standards and the rules which govern Registered Investment Advisors. Our concern is not the standard itself, but the regulatory and administrative burden the new rules may introduce.
The rest of the industry seems to be very concerned. According to Investment News, Google searches for ‘fiduciary duty’ have spiked.
Of course my simple analogy is not a comprehensive explanation of a complex issue, but so far most people who I told it to at least understand the big picture. If you have questions about the standards, the rules, or how you are affected let me know. Our mission is to make you comfortable within your own wallet.