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Exclusive Interview: Harold Evensky says DOL Fiduciary Opened “Good” Pandora’s Box

Exclusive Interview: Harold Evensky says DOL Fiduciary Opened “Good” Pandora’s Box
September 18
00:03 2018

As we’ve done since the honor was first awarded, we devote our September Exclusive Interview article to this years’ winner of the Frankel Fiduciary Prize. A name familiar with many of our readers, the 2018 Frankel Fiduciary Prize has been awarded to Harold Evensky. With experience in both the practical and academic worlds, he is often referred to as a “dean” among financial advisers. He is Chairman of Evensky & Katz, a fee-only wealth management firm and Professor of Practice at Texas Tech University. He holds degrees from Cornell University. Evensky served on the national IAFP Board, Chair of the TIAA-CREF Institute Advisor Board, Chair of the CFP Board of Governors and the International CFP Council. Evensky is author of The New Wealth Management and co-editor of The Investment Think Tank and Retirement Income Redesigned.

FN: Well, Harold, it seems like just the other month we were congratulating you for being honored for your work in the fiduciary realm, and he we are at it again. Congratulations for your being presented the 2018 Frankel Fiduciary Prize Award! Tell us a little bit about Tamar Frankel, the award, and what it means to you.
Evensky: The award is named after Professor Tamar Frankel of the Boston University School of Law.  Professor Franklin is a prolific author having published more than 70 articles and book chapters and she is the godmother of academic research in the field of fiduciary responsibility. Receiving this award is humbling indeed. Established in 2013, it’s hard to get my head around being in a group of prior recipients that include luminaries such as David Swensen and Barbara Roper.

FN: You join a long list of honorees spotlighted each year by the Fiduciary Institute. What role have you seen the Institute play in promoting the fiduciary cause?
Evensky: Led by the passionate Knut Rostad, the Institute has been in the forefront of promoting and keeping the issue of fiduciary responsibility in front of our regulators, legislators and the media.

FN: One of the headlines in 2018 has been the abrupt demise of the DOL’s Fiduciary Rule. Despite its being formally vacated, in what ways has the DOL’s Rule forever changed the financial services industry?
Evensky: Needless to say, I was sorely disappointed by the Court’s ruling; however, I believe the efforts of the DOL opened a “good” Pandora’s Box and the best efforts of those focused on product, not investors, are ultimately doomed to failure.

FN: How might the marketplace – by itself, without the aid of regulations – achieve for fiduciary what the DOL’s Rule intended to achieve?
Evensky: My soapbox for a long time has been to focus on the public media and investors, not regulators or politicians. Specifically, encourage everyone to have their advisor acknowledge their personal fiduciary commitment to the client in writing. That’s why the Committee for the Fiduciary Standard developed its simple mom-and-pop fiduciary oath.

I believe in placing our clients’ best interests first. Therefore, I commit to the following five principles:

  • I will always put your best interests first.
  • I will act with prudence; that is, with the skill, care, diligence, and good judgment of a professional.
  • I will not mislead you, and will provide conspicuous, full and fair disclosure of all important facts.
  • I will avoid conflicts of interest.
  • I will fully disclose and fairly manage, in your favor, any unavoidable conflicts.

FN: The SEC has promulgated its own successor plan to the DOL’s Fiduciary Rule. They call it “Regulation Best Interest.” What are your favorite aspects of this proposal? What do you believe to be its weakest components?
Evensky: Positive – Broker requirements for disclosure of material conflicts of interest, to mitigate those related to financial incentives and have a reasonable basis for recommendations. Negative – Limited to initial transaction, standalone broker-dealers, ability to switch hats; not an absolute and permanent fiduciary requirement.

FN: Do you feel the SEC goes far enough in proposing to restrict the use of the term “advisor”? What other titles do you see being used that might also confuse customers? Should the SEC restrict their use, too?
Evensky: Not from what I’ve seen to date. Marketing experts are very savvy and will have no trouble creating misleading alternatives; e.g., wealth manager.

FN: How might banning dual registration help prevent customer confusion? Give us a hypothetical way the SEC can achieve this? Why do you think this is possible?
Evensky: As soon as a dually licensed agent provides advice to a client, they permanently acquire the status of an investment advisor with respect to that client.

FN: In five years, ideally, where would you like to see the industry and the regulators be in terms of fiduciary issues?
Evensky: I know I’m dreaming, but I’d like to see elimination of the ability to “switch hats,” and requiring anyone who markets their services as including financial related advice be held to an ERISA fiduciary standard.

FN: Where do you think we’ll really be in five years regarding “fiduciary”?
Evensky: Still arguing the issue.

FN: President Trump recently signed an executive order addressing three retirement issues: 1) Resetting the age at which Requirement Minimum Distributions must be taken out of a retirement account; 2) The establishment of open 401k MEPs; and, 3) The reduction of retirement plan regulatory paperwork. What are your thoughts on each of these three areas?
Evensky: On the surface I like the concepts, but I recognize that the issues are not black & white, particularly with MEPs and paperwork reduction. I’ll withhold judgment until there are more details regarding the actual implementation.

FN: What message do you feel is important to leave our readers with and why is it important?
Evensky: The future of the fiduciary is not with regulators or politicians but with the public media and the client. Our job is to educate both and encourage investors to take control for themselves.

FN: Harold, on behalf of the readers of, we once again congratulate you on being named The Fiduciary Institute’s 2018 Frankel Fiduciary Prize Award winner. What we really like about your perspective is that it contains the words and phrases of simple, straight-forward, common-sense – the kind that appeals to the vast swath of everyday folks. Keep up the great work – and the great words!

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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