Soon I will have my dreaded annual appointment with my doctor. There is a high chance she will make me go through at least one uncomfortable test, tell me to take it easier on my knees by doing fewer trails runs, perhaps even give me a shot.
In general, I follow her advice (except the less running part) because I believe my doctor has my best interests at heart when she makes recommendations. But what if my doctor worked directly for Pfizer, or any company whose main business is selling a specific product? What if I developed a heart condition and she prescribed a Pfizer drug, would I be confident that a prescription for a Pfizer drug was the best solution to my specific issue, or was it simply the one her company was selling? How would I know?
In the financial world, we like to believe that all advisors have always acted in their client’s best interest. As odd as it sounds, prior to a recent Department of Labor ruling, not all financial advisors were required to do this. Most simply had to recommend investment products which were suitable, but not necessarily in their clients’ best interests.
The DOL set forth a requirement that any Financial Advisors working with retirement accounts had to act in the client’s best interest, acting as a Fiduciary to the client. The term Fiduciary brings with it the responsibility of doing what’s right for the client, not just what may be an okay investment the advisor was previously incentivized to sell. This change may lead many advisors towards more diversified, efficiently-priced investment options. In our view, this would be a win for everyone, especially investors. At Loring Ward, we’ve always believed that investors should work only with advisors who have a fiduciary duty.
We walked through the importance of working with an advisor who has a client’s best interest at heart, as well as several other steps investors should take, in our most recent 15-minute Making Sense of Markets video: Making Sense of Markets (Q2 2016)
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