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Don't Get Hung Up on Fiduciary Rule's Fate; Focus Should Be on Planning

Bryan S. Slovon, Investment Adviser, Founder and CEO, Stuart Financial Group
Just because your financial adviser is a fiduciary doesn't guarantee you're getting all the help you need. Here's what every investor should insist upon.

It's tough to say what will happen next with the Department of Labor's fiduciary rule.

SEE ALSO: Hidden Fees Show How Investor Protections Can Backfire

As expected, President Donald Trump has asked for further analysis of the much-debated regulation, which says financial professionals must put clients' interests ahead of their own when they make retirement investment recommendations. The April 10 compliance date has been delayed, possibly until June 9, and the rule eventually could be significantly reworked or even repealed.

That would, of course, thrill critics who argue that it goes too far. But it also could give those of us in the industry a chance to pause, take a breath and consider whether the rule actually goes far enough toward fixing the problems that really are out there.

It's a good step toward a noble goal: According to an estimate by the President's Council of Economic Advisers, conflicted investment advice currently costs savers roughly $17 billion a year.

But the rule ignores non-retirement accounts, which, for many people, serve as a large asset source that also deserves preserving.

More significant, simply adjusting the way financial professionals are paid, and making the hows and whys of what we do clearer through improved reporting and disclosures, doesn't necessarily address the need for more and better planning.

Consumers -- particularly retirees and those in the retirement "red zone," the five to 10 years before you leave the workforce -- need more than just money-management or asset-allocation advice. They need help building a comprehensive, in-depth financial plan that will help them feel more confident about their future.

I think that's what most people want -- but it isn't always what they're getting. I've found that, while there's no shortage of people out there selling financial vehicles, there is a shortage of financial professionals offering more holistic help for people who desperately need it.

Unfortunately, the lines have blurred, and financial professionals can refer to themselves by just about any title they choose: money manager, broker, agent, adviser, planner or wealth manager. The ever-evolving list of terms, as well as their varying roles and values, can be confusing and misleading for consumers. But there is a difference between selling and planning, and between the suitability and fiduciary standards.

Even investors with substantial funds can miss out on this important piece. They might work with people who have fancy offices or financial strategies and are good at what they do. But they're ignoring the planning, and that's a problem; when you accumulate more assets, there are a multitude of issues you must address.

I have a client, well into retirement, who came on board about a year ago with approximately $1.5 million in assets. He had a financial professional he met with frequently, but all they dealt with were investment issues -- no tax planning and no wealth-transfer planning for a client who cares deeply about his family.

Consumers, especially retirees, need someone who can assist them with defining a time horizon, establishing long-term goals and keeping the focus on those goals instead of the day-to-day ups and downs in the markets.

It's service vs. selling.

Regardless of whether the fiduciary rule actually becomes a reality someday, firms should be working toward giving their clients this kind of support.

See Also: Even If Fiduciary Rule Gets Killed Under Trump, Investors Have Wised Up

Kim Franke-Folstad contributed to this article.


Copyright 2017 The Kiplinger Washington Editors