When I meet with a new client, prior to giving any recommendations regarding their accounts, I first assess where they are and what appears to be going on in their accounts. On one hand, my business benefits from widespread bad investment planning because we are hired to fix the problems. On the other hand, every bad experience a client has creates a trust divide between the general public and the financial services industry.
When broaching the subject of the DOL Fiduciary Rule, the common response I hear from almost all advisors is “I do whatever is best for my clients.” Unfortunately, most of the time, the work being done for clients would not pass the standard of the Fiduciary Rule, but not for the reason(s) that most advisors want to believe. This is based on a key fiduciary tenant stating that an investment fiduciary must follow a well-documented, thorough, and prudent process. Without being able to articulate the decision-making process and the investment-vetting process as a prudent expert would, an advisor is actually in breach of their fiduciary responsibility, even if the outcome is positive.
A financial advisor who gives investment advice needs to have a detailed set of processes and procedures for making investment decisions, and they must be tailored to the financial advisor and his/her clients’ unique demographics. Additionally, the financial advisor is required to show documented compliance with their processes and procedures.