BAM Intelligence

The Ironic Conflict Of Interest of the Fiduciary Financial Advisor

The Trump administration’s move to delay implementation of the Department of Labor’s fiduciary rule has inspired me to delay implementation of my commitment to remain silent on matters of public policy and politics. It’s that important.

It seems pretty obvious that those in the financial establishment who oppose the rule do so primarily out of self-interest. After all, it’s estimated that they will lose billions in profits if the final rule goes into effect. I get it.

But I was fascinated recently when a member of the media wondered aloud if my advocacy for a wider fiduciary standard was also simply an outgrowth of my own bias.

Indeed, who’s to say I’m not just grinding my own axe on this issue? Maybe I’m in favor of all financial advisors being held to a fiduciary standard because I’m a fiduciary financial advisor and part of a national community of financial advisors that supports the fiduciary standard.

That would be a convenient rebuttal from the anti-fiduciary community, but here’s the (huge) problem with that rationale:

While those in the financial services industry opposed to the rule understandably don’t want it because it cuts into their profits, the fiduciary community as it currently stands actually loses a clear competitive advantage if everyone has to be a fiduciary. Why? Apparently informed consumers actually like the idea that their advisor has to do what’s best for them. Imagine that!

Here’s how financial industry maverick Jack Bogle put it in his recent New York Times Op-Ed:

It simply doesn’t seem like a good business practice for Wall Street to tell its client-investors, ‘We put your interests second, after our firm’s, but it’s close.’

It’s bad business to be publicly against your clients’ best interest—and it’s good business if your competition takes such a stance.

Perhaps, then, fiduciary advisors are for the fiduciary rule simply because they’re, uh, fiduciaries.

This commentary originally appeared February 24 on Forbes.com

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Tim Maurer, Director of Personal Finance

The BAM ALLIANCE

Tim Maurer is the director of personal finance for the BAM ALLIANCE. A Certified Financial Planner™ practitioner working with individuals, families and organizations, he also educates at private events and via TV, radio, print and online media.

Tim is a regular CNBC contributor and writes for Forbes.com. A central theme, that “personal finance is more personal than it is finance,” drives his writing and speaking.

Maurer graduated from Towson University, where he taught financial planning for seven years. His second book, co-authored with Jim Stovall, is published by John Wiley and Sons under the title “The Ultimate Financial Plan: Balancing Your Life and Money.”

Tim and his wife, Andrea, live in Charleston, SC with their two boys, Kieran and Connor, and their dog, Raven. A musician, Tim plays at his church and occasional local gigs. He also participates in a group dedicated to serving the people of Nicaragua through microfinance and entrepreneurial ventures.

You can follow Tim on Twitter at @TimMaurer.

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