The Department of Labor’s New Fiduciary Rule What Does it Really Mean?


The U.S. Department of Labor (DOL) released its final Fiduciary Rule in early April, which will become effective next year at this time. This rule was first introduced nearly six years ago and has gone through some significant changes during its various drafts.

What is the Fiduciary Rule?

Simply stated, the new rule requires financial advisors to act solely in the best interest of their clients when dealing with retirement accounts IRAs and 401(k) plans. What seems on the surface to be common sense (i.e., putting the best interests of your clients before your own), actually received push back from a number of brokerage firms and insurance companies. That reaction is a bit puzzling to me, since we at Szarka Financial feel that this should be a minimum expectation of our clients. That is how we do business.

Each week we receive many phone calls and emails from prospective clients inquiring about our firm. I personally return each of those inquiries and when I have the opportunity to speak with these people, I share that we are proud to act in a fiduciary manner with clients. Most of these people have either never heard of “in a fiduciary capacity” or admit they don’t quite understand what it means in the context of financial planning. I explain the concept in detail and encourage them, as they may call other organizations as part of their due diligence in selecting a planning firm with whom to work, to not only ask the other advisors or firms on their list if they act in a fiduciary capacity, but to ask those—who respond, “yes”, to define “how” they do so—in detail.

The retirement planning industry is one that is built mainly upon establishing trust and credibility with people. If you do so and make this philosophy the basis of your culture and how you operate, then having such a rule put into effect is not a big deal as it ultimately just supports how you’ve always done business and treated clients.

Acting in a fiduciary manner is something we should expect from any professional or organization with whom we, as consumers, choose to work. For example, would you want your attorney, CPA or doctor to provide to you their respective services while putting their own interests before yours? Not me.

Like any ruling issued by a government agency, the DOL’s new Fiduciary rule has many pieces and parts to it. I would encourage everyone to read and learn as much as possible regarding this new rule as it becomes available over the next few months, as it is certain to be an ongoing hot topic in the financial news.