The Average Investor’s Guide to the New DOL Fiduciary Regulations


The U.S. Department of Labor (DOL) has done a yeoman’s job of tentatively passing new a new set of regulations that will benefit individual investors from the conflicts-of-interest that are too common in the financial advisor business.

But in order to get the revolutionary new regulations passed, the DOL had to make concessions to the multi-million lobbying efforts waged by the financial services industry.

Since the new regulations were written by lawyers for other lawyers, it is difficult or impossible for the average investor to understand what all the new concessions were made to the financial services industry by the regulators.

As an example, this is a link to the eight-page memo the DOL issued that showed it concessions it made to the financial services industry and its lobbyists inorder to get this pro-investor regulation advanced.

"Never give a sucker an even break" vs. the fiduciary standard
“Never give a sucker an even break” vs. the fiduciary standard


As just one example, the DOL was forced to extend the time limit for the regulation to be implemented after the financial industry characteristically complained that it needed more time to put the anti-conflict-of-interest rules in place.  In DOL language, this is how the concession was stated:

“The Department extended the first phase of implementation to one year after publication of the final rule. In addition, the Department adopted a “phased” implementation approach for the Best Interest Contract Exemption and the Principal Transaction Exemption so that firms will have more time to come into full compliance. In particular, the full disclosure provisions, the policies and procedures requirements, and the contract requirement only go into full effect on January 1, 2018.  Finally, the Department made it clear that it intends to provide compliance assistance to firms that have implementation questions to the greatest extent possible.”

Importantly for individual investors, the new regulations don’t include a review of any past investment recommendations or contracts for REITS or other limited partnerships that were made with an advisor who may not have had an enlightened idea that conflicts-of-interest work against a clients’ best interests. This means individual investors who were sold inappropriate, expensive products will not be able to get their mistake rectified by the advisors who sold them to unsuspecting investors in the first place.

It’s important to note that the new pro-investor regulations are not a done deal.  The financial services industry will continue to spend millions of dollars lobbying against the DOL rules until they are slated to be fully enacted on Jan. 1, 2018. They have been battling these regulations for about a decade and spent millions of dollars in client money to work against the best interests of their own customers. Based on their lobbying efforts that have opposed the adoption of the fiduciary standard over the past decade, as well as the industry’s unified opposition to the Consumer Finance Protection Bureau, it’s doubtful if there is any industry in the U.S. which has such distain for its own customers as the financial services industry.

So since the past is an indication of the future, the financial industry will continue to seek to de-rail the regulations until the final hour. The industry will also work against any Democrat being elected to the White House since both Clinton and Sanders support the pro-investor, fiduciary rules.

So with this in mind, individual investors should take action on their own to protect their own investments.

What Individual Investors Should Do to Protect Their Portfolios

So with that in mind, here is a simple check list of things to ask for and see when dealing with advisors to make sure they understand that you now that new DOL fiduciary regulations are in the pipeline.

  • Learn to identify conflicts-of-interest in financial relationships, including those affecting your 401(k) at work.
  • Remember that managing fees and expenses is the most important factor under an investor’s direct control. They must be managed for long-term financial success.
  • Follow the “one-strike and you’re out rule” when it comes to dealing with your financial advisor. “Financial mistakes are too expensive for all investors and for retirees they represent money that can never be recovered,” he said.
  • Ask your financial advisor if they adhere to the fiduciary standard, then ask them what it means to them, and finally, have them put that claim in writing.
  • Get politically active and ask your elected representatives in Congress to continue to advance the DOL’s fiduciary standard regulation.
  • Ask your advisor if their firm or the funds in your portfolio are managed by firms, such as AG Edwards, Edward Jones, BofA, Merrill, CitiBank, Oppenheimer, Principal, Hancock, Fidelity, T. Rowe, etc., contribute to lobby against the fiduciary standard. If they do, look for another firm or register your complaint that your own money is being used to generate fees and revenues that are then diverted to lobbyists working against your best interests.
  • Don’t invest in fund companies that employ mutual fund wholesalers. Wholesalers are used in a national sales force and are among the most highly-paid jobs in the mutual fund industry, with an average salary of $165,000, according to Simply Hired. Wholesaler expenses are used to increase assets under management, but do nothing to boost the return on your mutual funds. On the contrary, they often decrease returns.
  • Ask your advisor when your mutual fund last reduced its fees. Funds that grow in asset size reach a more efficient scale of economy and are cheaper to manage, especially with the decreasing costs of technology.  If your fund is growing in assets and has not made a corresponding decrease in their total expense ratio, ask why those savings are not being passed along to shareholders.

These may be tough questions, but the reality is no one will be more concerned about your money than you. Take the needed steps to protect it. If not, you have no one to blame but yourself.






Please enter your comment!
Please enter your name here