New Fiduciary Ruling - A Better Standard


An important ruling passed on April 8th, 2016 by the Department of Labor should be considered a major win for investors everywhere.

In a nutshell, many advisors and investment managers currently adhere to what is referred to as a “suitability” rule meaning that their advice has to be considered suitable for a client, however, it is not required that the advice be in the client’s best interest. This new ruling moves the investment world closer to a fiduciary standard for many advisors – particularly those advisors associated with brokers such as JP Morgan, Merrill Lynch, UBS and many others. A fiduciary standard requires advisors to operate in the best interest of the clients.

While we deeply understand that it is not possible to legislate morality (despite this 1,000 page ruling), there is no doubt that this legislation is an attempt to reign-in conflicts of interests, commission influenced advice, and products that are so complicated to understand that it’s difficult to trace the actual costs (and benefits). It is a milestone for the planning profession and for those Registered Investment Advisors (RIAs) that already operate under a fiduciary standard.

Pauley Financial, in its 20 years, has always operated under a fiduciary standard.

While there remain numerous loopholes, and the ruling is expected to be challenged, it seems that if you could simply get your advisor to commit to the National Association of Personal Financial Advisors (NAPFAs) Fiduciary Oath, you should have the bases covered. We are proud to continue to renew and adhere to this standard.

  • The advisor shall exercise his/her best efforts to act in good faith and in the best interests of the client.

  • The advisor shall provide written disclosure to the client prior to the engagement of the advisor, and thereafter throughout the term of the engagement, of any conflicts of interest, which will or reasonably may compromise the impartiality or independence of the advisor.

  • The advisor, or any party in which the advisor has a financial interest, does not receive any compensation or other remuneration that is contingent on any client's purchase or sale of a financial product.

  • The advisor does not receive a fee or other compensation from another party based on the referral of a client or the client's business.

Or, in our own language:
  • Place our client's interests first - always.

  • Be honest, forthright and transparent.

  • Educate our clients so that they feel confident in making important life choices.

  • Exceed continuing education requirements.

  • Be proactive in disclosing any conflicts of interest that may arise.

  • Accept no compensation from any source that is not derived directly, and as agreed upon, from our clients.