Thus hath the DOL wrought (see “Six Months Later and It’s Now Clear the Current DOL Fiduciary Proposal Worsens Investor Protections,” FiduciaryNews.com, September 15, 2015).
Knut A Rostad, president of the Institute for the Fiduciary Standard, says the “DOL’s [proposed] Conflict-of-Interest Rule is a courageous effort to apply fiduciary principles—however clumsily at times—consistent with law, logic, and plain commonsense.” But, he adds, “Law, logic and commonsense may be bested by the campaign against investors’ best interest.”
It no longer suffices to state a fiduciary is a person that always acts in the best interest of the client. The term “best interest” has been co-opted to an area of grayness that denudes any meaning it might have once had. To brand “fiduciary” together with “best interest” is a worthless juxtaposition. We have now arrived at the appointed hour where it is time to rebrand “fiduciary” into something that removes, for the benefit of the average investor, all ambiguity from its operational definition.
Actually, should the DOL go ahead with its proposed Rule as is, we can’t even speak of the word “fiduciary” anymore. Why? Because the proposed Rule will allow everyone to call themselves a “fiduciary.” And, to paraphrase Buddy (aka Syndrome, “the bad guy”) in The Incredibles, “When everybody’s a fiduciary… [evil chuckle]… no one is.”
So, in the spirit of many others before me (including Rostad and Ron Rhoades), allow me to offer my own proposal: The Definition of a True Fiduciary.
Forgive me for not using anything that might be mistaken for legal language, but the audience isn’t practitioners, their compliance officers, of even their regulators. The audience is the lay investor. The person who does his best to provide for his family, works diligently, and tries his hardest to find the best way to save (and invest) for his retirement.
“A ‘True Fiduciary’ provides investment advice for a fee paid directly by the client and will not receive compensation from commissions, 12b-1 fees, or revenue sharing.”
If the DOL’s proposed rule goes through, those offering product advice can call themselves a “fiduciary,” but under this rebranding, only a “True Fiduciary” can offer investment advice.
Which is better?
That’s a decision best left to the individual investor—not politicians, lobbyists, or regulators.