The Fiduciary Rule - A Step in the Right Direction

The objective of the fiduciary Rule, which was finalized by the Department of Labor last week, seeks to hold financial institutions, advisors, and registered representative to a higher standard, being that they are required to act in the investors' best interest when providing retirement advice. As a Registered Investment Advisor, Black Oak Wealth Management is required to act in the best interest as it is.

  • Meanwhile, lobbyists have negotiated with the Department of Labor to riddle the fiduciary rule with exemptions and "loopholes" for traditional advisors/ broker-dealers selling conflicting high commission investments. 
  • The ruling is a document exceeding 1,000 pages.
  • Black Oak supports the rule, which imposes new requirements on recommendations for investments in 401(k)s and IRAs, though we wish it didn't provide the loopholes. At least it's a step in the right direction. Even more challenging, the rules aren't set to go into effect fully until 2018, which gives "salesmen" the opportunity to gain a lot of commissions in the meantime.
Many investors are unaware that their retirement account managers and advisors, including brokerage firms and mutual fund companies, are currently under no obligation to act in their best interest.

Investors are also often unaware of the fees they are charged, because those fees may be hidden in the fine print. Once the new rule is implemented, investors will receive additional disclosures regarding fees, compensation, and potential conflicts of interest when they receive investment recommendations concerning their retirement accounts.

The fiduciary rule should also help prevent instances of product steering, which occurs when brokers and advisors direct clients to invest in more expensive investment products—including their own branded products—over others.

How the Rule Impacts Advisors, Brokers, and Account Managers

Opponents of the rule cited implementation costs, such as the costs to retrain advisors or update legal procedures and technologies, as a reason to not support it. They also argued that, if forced to abide by the fiduciary rule, they would no longer find it economically feasible to provide services to lower-balance accounts.

But we believe the rule’s opponents actually pushed back because they wanted to preserve an outdated status quo—one that did not always put customers first, or prioritize transparency, innovation, and un-conflicted advice.

Our transparent pricing is our only source of revenue, which is not affected by the ETFs that we recommend in our investment portfolios.

We've established Black Oak Wealth Management as an alternative to the conflicted, sales-driven business models that previously dominated the market for retirement advice. We applaud the DOL for finalizing the fiduciary rule, and for recognizing that an un-conflicted approach will create better outcomes for investors.

Phillip Hanks