The fiduciary rule was scrapped in 2017, but individual states are working on a state level to enact fiduciary standards.
A quick refresher: the fiduciary rule was introduced so that US advisers would legally be obliged as “fiduciaries” – working in the best interests of their clients for retirement accounts. It might seem redundant to have such a rule exist. After all, wouldn't all advisers be working in the best interests of their clients? Strangely enough, no. Financial advisers in the US - unless they are fiduciaries - technically have no duty to their clients when it comes to their retirement accounts.
Recently, Nevada Securities Division spun the fiduciary rule up from the dead. Why would they do this and what does it mean for the industry?
When the fiduciary rule first passed, a flurry of advisers rushed to say they were happy about it. They were part of the new era of financial advisers, who lead by true value and not pushing sales. Jon Stein, CEO of roboadviser Betterment, wrote, "Too many financial companies today profit by putting their financial interests ahead of their customers …a problem not just for their customers' accounts but for how we, as a nation, manage retirement."
However, not everybody was pleased. Namely, active managers.
For example, Joe Sullivan of Legg Mason diplomatically told the Financial Times that, "Because of the rules it will be more difficult for advisers to recommend higher-fee products, even if they are better. This is both a challenge and an opportunity."
Indeed, retirement, once about selling products such as annuities, was now shifting gears.
Then, the fiduciary rule was overturned.
However, the toothpaste is already out of the tube. Financial transparency has gone mainstream.
John Oliver centered an entire segment around the fiduciary rule. Frugality bloggers like Peter Adeney (aka Mr. Money Mustache) have been featured in big publications like The New Yorker. The world knows about fees.
Perhaps that's why states like Nevada are working to revive the spirit of the fiduciary rule. And Nevada isn't the only state: New Jersey and Maryland are on board too.
Product selling is not going to cut it, and this is even more of a point as the markets plunge. Financial advisers must work to keep current clients satisfied and entice new clients to get on board by proving value. As "fiduciary" standards rise, so too will the standards of your clients.
