By Skyline On Tuesday, February 07 th, 2017 · In

FIELD NOTE: FEBRUARY 2017

THE FIDUCIARY STANDARD FIGHT

The White House Counsel of Economic Advisors reports that backdoor payments and hidden fees cost American citizens $17 billion per year in retirement savings. Interest-conflicted advice may reduce investment returns by 1% per year, in turn diminishing a retirement portfolio by 20% over 42 years.

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The fiduciary standard, due to replace the suitability standard, requires investment advisors to disclose all fees and, most crucially, advocate for the best interests of the client. Despite this change having a clear public benefit, multiple national brokerage firms are contesting implementation of the fiduciary standard.

Sources: Obama White House Archives; National Bureau of Economic Research

UPDATE: TRUMP'S EXECUTIVE ORDER

 

To the Skyline Community,

Today, February 3rd, President Trump signed an executive order halting the progress of a fiduciary rule set to go into effect this April. The rule would have required a large number of financial professionals who currently abide by the 'suitability standard' to instead always advocate for the 'best interests of their clients.'' This new fiduciary rule was imperfect, but would have considerably improved consumer protections.

When Gary Cohn, Trump's director of the National Economic Counsel and former Goldman Sachs executive, was asked why raising the industry standard was problematic, he responded:

 

"This is like putting only health food on the menu, because unhealthy food tastes good. But you still shouldn't eat it because you might die younger," Mr. Cohn told the Journal.

We, the advisory team at Skyline, contend that financial information is not readily understood by the public at large. Just as fields such as law and medicine have embraced a fiduciary standard because of the immense technical knowledge required to make informed decisions, so too should the financial industry. Furthermore, the regulation of our industry does not restrict the freedom of consumers to purchase "unhealthy food," so to speak, merely the industries ability to profit from public innocence.

Lastly, we encourage all of you to converse with friends and family about this issue. If you would like to know more, please reach out to your advisor.


Sincerely Yours,
Scott Frey, CFP®
Aaron Hillman, CFP®
& Scott Emblen, CFP®

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