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Does “Fiduciary” Matter Anymore?

Does “Fiduciary” Matter Anymore?
July 09
00:03 2019

With the SEC’s new Regulation Best Interest (“Reg BI”), the term “fiduciary” seems to have taking a back seat. But that may not mean what it appears. This may be a sign the market is growing weary of all things “fiduciary.” On the other hand, it may be that “fiduciary” has now become the de facto standard in a large portion of the marketplace.

Has “fiduciary” peaked? And, if so, when might that peak have occurred?

There are those that say “fiduciary” saw its acme just as the DOL unveiled its Conflict-of-Interest (a.k.a. “Fiduciary”) Rule. Some look fondly back at era in history. Others scorn it. Richard Reyes of The Financial Quarterback in Lake Mary, Florida, falls in this latter group. He says the “fiduciary” peak was “probably on or about 2016 when the Obama Administration was trying to shove the DOL ruling down the throat of the industry.”

But the DOL’s attempt to create a uniform fiduciary standard had a beginning and an end. Quite a few people look at the now vacated Rule’s demise as the crest of “fiduciary.” “The term peaked about a year ago, around the time the DOL’s ‘Fiduciary’ Rule died,” says Jeffrey Burg, Partner at DB Financial Partners in Phoenix, Arizona.

Modern science, however, provides the definitive answer. “The general public’s collective interest in Fiduciary peaked in early 2017 according to data from Google Trends and I would concur,” says Timothy Hooker, Investment Manager at Dynamic Wealth Solutions LLC in Southfield, Michigan. Indeed, a review of

Indeed, according to Google Trends, searches on the term “fiduciary” spiked to their highest levels the first week of February, 2017. It was on February 3, 2017 that President Trump issued a memo directing the acting Secretary of Labor to reevaluate the Obama DOL’s Fiduciary Rule. Ironically, the incoming Obama administration did the same thing to another DOL Rule promulgated during the waning months of the predecessor Bush administration.

What might explain the apparently ebbing interest in “fiduciary” over the last couple of years? Certainly, oversaturation could be cited as one reason. “The term peaked because it was being used constantly in both the media and advertising,” says Burg, “but the majority of the public had no idea what it meant and they got tired of hearing it. Prospective clients roll their eyes when they hear the word fiduciary and say that the word doesn’t mean anything to them, but that they hear it everywhere.”

Overuse tends to devalue the term, and this may have been the case with “fiduciary.” “It peaked because everybody was discussing the issues of plan fiduciaries and it became commoditized like fees,” says Jairo Gomez, the Director of Retirement Plan Services at Allworth Financial, formally Hanson McClain Advisors, a California-based financial advising firm.

As with all overworked terms, the public airwaves eventually decide enough is enough and quit using the term. This absence can be quite noticeable to some. “I feel like it has peaked because the mainstream media rarely talks about it,” says Hooker, who adds, “consumers get lost in the jargon if it doesn’t directly impact them so interest has gone away.”

But the media alone does not explain it. Certainly, the industry – or, rather, a specific segment of the industry – had a vested interest to fight “fiduciary.” “The big money banks, brokers, mutual funds are not in favor,” says David S. Thomas Jr., CEO at Equitas Capital Advisors, LLC in New Orleans, Louisiana. “It is very difficult to retrain a salesman to stop pushing a product, and to start working in the best interest of the investor.”

Marc Smith, Managing Partner at Marc Smith Investments in Dillsburg, Pennsylvania, says, “If it has peaked, I would argue it’s because the large firms have made a push to convince the public it doesn’t matter. Non-fiduciary advisors make a lot of money on commissions from placing clients in high-fee products. They have every interest in making people believe the fiduciary standard isn’t that important.”

It’s not necessarily due to industry malevolence, though. It could simply be that other topics have taken the forefront. “The focus (or interest) on fiduciary issues has seemingly diminished, probably as a result of recordkeepers’ and consultants’ efforts to market and/or highlight other concepts such as promoting greater savings (for example, by implementing automatic enrollment and/or automatic escalation),” says John C. Hughes, an ERISA/benefits attorney with Hawley Troxell in Boise, Idaho, says.

And this changing of the topical guard may be more important. It may not be that “fiduciary” has peaked. It may be that it has now become mainstream, second-nature in fact. “I don’t feel that it has peaked,” says Chris Shankle, Senior Vice President at Argent Retirement Plan Advisors in Shreveport, Louisiana. “It’s still a valid issue although for differing reasons depending on perspective (advisor, plan sponsor, regulator).”

Hughes, considers even asking why “fiduciary” may have peaked to be “a very interesting question.” He points out “the importance of recognizing one’s fiduciary duties and fulfilling them has not diminished. As such, the interest in fiduciary concepts having peaked is curious and dangerous. There have been no changes to those duties or the associated consequences. If anything, it is more important than ever to recognize and attempt to fulfil fiduciary duties given the increased amounts of money at issue, increased government enforcement, and the increase in lawsuits brought against fiduciaries by plan participants.”

Not even the SEC’s Reg BI, try as it might, can really take the luster from “fiduciary.” “I don’t agree at all with the term Fiduciary taking a back seat to the term Best Interest,” says Derek S. Taddei, Client Services – 401k Plan Marketplace at Stellar Capital Management in Phoenix, Arizona. “Regulation BI is brand new, and has yet to be sorted out. Brokerage firms may tout BI as the latest and greatest, but at present it is but a better version of the suitability standard.”

It is this continued affiliation with the suitability standard – even if it a “better version” of it – that may prove Reg BI’s undoing. And this may mean “fiduciary” isn’t going downhill for a while. “I don’t believe we’ve hit peak interest in fiduciary duty,” says Smith. “I think this is the most critical thing consumers should know before hiring an advisor. A fiduciary standard means I legally have to act in a client’s best interest. That’s very important when it comes to over-priced or high-commission financial products. Regulation Best Interest simply means the advisor has to put you in ‘suitable’ investments. That is a very vague and broad term. All manner of high-fee products could be deemed ‘suitable.’”

As Thomas says, “Fiduciary is not dead, just had a bucket of political cold water poured on it.”

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Though perhaps verging on the cliché, “fiduciary” remains ascendant where it counts. “Certainly, for employers, it seems that they have become callused to the issue from its usage in sales pitches,” says Shankle. “Its relevance, however, is still quite high in the industry and is definitely still on the minds of regulators. I believe the DOL will still propose a rule, although different and possibly more focused than previously. Of course, too, there are the state proposals that are popping up. If we are to have multiple distinct rules proposed by states, we may have a peak in interest to come.”

So, yes, “fiduciary” still matters. It may not appear in superficial headlines at the rate it has in the past, but it is solidly ensconced in the hearts of those that matter most.

Christopher Carosa is a keynote speaker, journalist, and the author of  401(k) Fiduciary SolutionsHey! What’s My Number? How to Improve the Odds You Will Retire in Comfort, From Cradle to Retirement: The Child IRA, and several other books on innovative retirement solutions, practical business tips, and the history of the wonderful Western New York region. Follow him on TwitterFacebook, and LinkedIn.

Mr. Carosa is available for keynote speaking engagements, especially in venues located in the Northeast, MidAtantic and Midwestern regions of the United States and in the Toronto region of Canada.

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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