Department of Labor Amended Fiduciary Rule May Completely Disrupt the Investment Industry; Family Investment Center Says Rule Could Save Investors Millions of Dollars

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After a shocking White House report last year and months of analysis, one of the most aggressive regulatory initiatives to hit the investment industry in the past four decades was announced by the Department of Labor on April 6, 2016. Dan Danford, Founder/CEO of Family Investment Center, supports this change and has long advocated that the industry should put client interests first.

Family Investment Center

‘Let the buyer beware’ is gone for retirement accounts.

After a shocking White House report last year and months of analysis, one of the most aggressive regulatory initiatives to hit the investment industry in the past four decades was announced by the Department of Labor on April 6, 2016. Officially, the rule amends the definition of "fiduciary" under the Employee Retirement Income Security Act of 1974 (ERISA), and aims to create a client-focused, commission-free setting where genuine professionals provide unbiased advice to retirement investors – advice that isn’t motivated by potential commissions on investment products they sell.

Reports and discussions about the rule complement a 2015 White House report stating that Americans could lose millions of dollars in potential investment growth each year when brokers make recommendations based on commissions, typically in a brokerage firm setting. A deadline of Jan. 1, 2018, has been announced for all firms to change the way they work with clients for IRA and ERISA retirement accounts.

Dan Danford, Founder/CEO of Family Investment Center, has long advocated that the industry should put client interests first. “We’ve operated in a commission-free, fee-only environment since 1998, years before the idea caught the attention of regulators or consumers,” says Danford. “This is the direction we knew we needed to go to promote consumer protections and make sure clients received advice that’s in their best interests. Now that the entire industry may be catching up to the client-first philosophy, this day marks a really significant shift for investors and consumers. ‘Let the buyer beware’ is gone for retirement accounts.”

Firms who operate on a commission-based policy will soon begin implementing changes, and will need to compete on a level of expertise, knowledge, and experience for investors’ business. Brokerage and insurance company opposition has been brisk toward the amended rule, but every aspect of finance and investing could be affected in some way. Some investors could choose to transfer their investments to fee-only, commission-free advisors right away.

The White House report “The Effects of Conflicted Investment Advice on Retirement Savings,” released in February 2015, says that brokers who charge a commission on products they recommend to their clients are a “threat” to Americans, costing them thousands of dollars in potential revenues. Officials from the Department of Labor have reviewed and discussed more than 500 comments at a series of hearings.

“According to the White House report, investors who get conflicted advice could see a 12 percent loss in potential growth in their IRAs over a 30-year period,” says Danford. “Not every broker is putting their customers in a position to lose money, but conflicted advice leads to far less productivity than taking guidance from non-conflicted advisors. For us, and other firms who have always operated without commission-motivated sales, it’s business as usual while we look forward to offering our experience and knowledge base to a new segment of investors.”

Danford doesn’t understand why a business would oppose the rule nor want to do business any other way than in their clients’ best interests. “Advice toward investments or other consumer areas that’s motivated by sales commission doesn’t count as true advice. Instead, it’s just a sales tactic. We’re truly excited about how the rule will create more transparent and unbiased opportunities for success for individuals and families everywhere.”

In contrast to brokers or planners that accept commissions, fee-only advisors like those at Family Investment Center won’t accept sales commission. Instead, they are usually paid a flat fee or percentage of assets under management for their services. Many investors say they prefer this type of advisor because they are committed to helping clients understand issues involved with their portfolios and help identify what investors are actually paying for in retirement investments.

Listen to an audio explanation of the importance of the amended fiduciary rule by Dan Danford here:
https://soundcloud.com/user-243226406/dol-regulations

Read more in the Family Investment Center whitepaper “The Changing Roles of the Investor and the Investment Advisor: How Conflicted Advice is Changing the Conversation About Investment Success,” Feb. 2016. http://www.familyinvestmentcenter.com/files/FIC_whitepaper_Feb_2016_single_page.pdf

About Dan Danford and Family Investment Center
Dan Danford serves as Founder/CEO of Family Investment Center, a full-service, commission-free investment advisory firm. Based in St. Joseph, Mo., Family Investment Center also serves clients in the Kansas City Northland area and across the country. Solutions for clients include investment advisory services, retirement planning, investing for women, investing for non-profits, and Social Security analysis. Danford’s expertise has been highlighted in top media publications including Forbes, Mint.com, The Wall Street Journal, US News & World Report, Medical Economics, Yahoo Finance, Business Week, The New York Times and ABC News. For more information, visit http://www.familyinvestmentcenter.com.

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Family Investment Center
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