How The New “Fiduciary Rule” Protects Investors

Over the past year, there has been no shortage of news coming out of Washington D.C.  One piece of news you may have read pertains to the Department of Labor’s (DOL) Fiduciary Rule.  This rule was proposed by the Obama administration and officially went into effect on Friday.  The rule has sweeping implications to the investment advisory industry so we wanted to take a moment to explain how this rule impacts you, our client.

In short, the “Fiduciary Rule” only pertains to retirement accounts, however the SEC has recently begun looking into the issue on a broader scale.  To be a fiduciary means that a financial adviser is held to “impartial conduct standards” and required to put their clients’ interests before their own, charge reasonable compensation and not make misleading statements.  Now, we are sure you are asking yourself, “Isn’t this what all advisers do?”  You may be surprised to hear that the answer is often no!

The Fiduciary Rule and its impact on Financial Planning image for family business investment advisers McRae Capital Management.

The financial advisory business is made up of a host of firms which operate under different rules and regulations.  By law, a Registered Investment Adviser, such as McRae Capital Management, is held to the higher standard of fiduciary.  However many brokerage firms, such as Merrill Lynch and Morgan Stanley, as well as insurance companies are only held to the “suitability” standard.  This means they can push higher-cost products so long as they would be considered suitable for the client’s risk profile.  This often results in advice that is geared toward lining the pocket of the adviser over the well-being of the client.  Unfortunately, the public is often unaware of these differences and is the reason for the DOL issuing the new rule.

To be a fiduciary means that a financial adviser is held to “impartial conduct standards” and required to put their clients’ interests before their own, charge reasonable compensation and not make misleading statements.

For McRae Capital Management clients, all of the noise around the “Fiduciary Rule” means very little.  Since our founding in 1981, we have always operated under the fiduciary standard.  Our only focus is the long term financial success of our clients.  Our method of compensation is simple, easy to understand and aligns our interests with those of our clients.  We are paid a single quarterly fee and invest for you based on guidelines that we create with you.  We have nothing to sell and we receive no commission income.  There are no hidden charges.  We’ll never advise you to invest in something because it’s good for us but not for you.  Toward that purpose and at no additional cost, we also include financial planning services to help prepare our clients for all different stages of life.

Since our founding in 1981, we have always operated under the fiduciary standard.  Our only focus is the long term financial success of our clients.

While many firms are fighting the implementation of the rule, we believe that all firms that give financial advice should be held to a fiduciary standard.

The DOL’s “Fiduciary Rule,” and what it means for McRae Capital Management Clients

This article originally appeared as an email to McRae Capital’s clients. If you have any questions or concerns about the Department of Labor’s Fiduciary Rule, or anything else you would like to discuss with us, please don’t hesitate to give us a call.