Fiduciary Rule

For many investors, sorting through the maze of financial advice can be a daunting task. The 10,000 baby boomers retiring each day (according to AARP), face myriad of choices. Among those, include selecting the right financial professional to help with complicated retirement decisions. All financial advisors tout retirement and investment solutions, but the method by which some are compensated muddy the waters for investors looking for an unbiased and clear alignment between their goals and the solutions recommended to meet those goals.

In 2016, the Department of Labor sought to better align investor interests with industry compensation practices through The Fiduciary Rule, which would have required brokers, working with retirement accounts, to act as a fiduciary and put clients’ interests ahead of their own.* While FineMark National Bank & Trust has always operated under the fiduciary standard, it is not commonplace throughout the industry.

The rule, which was struck down by The Fifth Circuit Court of Appeals in early 2018, would have affected most financial advisors in some way, however, commissioned brokers and insurance agents would have been impacted the most. Commissioned advisors typically operate under a “suitability” standard as opposed to a “fiduciary” standard. Under a suitability standard, multiple solutions may be deemed suitable for an investor; however, the solution chosen is often the one that yields the highest commission to the advisor.

On the other hand, financial advisors operating under a fiduciary standard are not compensated based on what solution is recommended, or the number of transactions recommended. Rather, compensation is often based on an annual percentage of account holdings, thus better aligning the interests of investors and advisors.

The Securities and Exchange Commission, along with other regulators, continue to work to protect investors from predatory commissions, but until something is approved, investors’ retirement accounts could be subjected to outdated industry compensation practices.

At FineMark National Bank & Trust, our Private Wealth Advisors are not compensated based on the nature of the investments recommended or the frequency of investment transactions. Part of our culture is to always do what is right, and that means eliminating any conflicts of interest between our professionals and the clients we serve.


*Chiglinsky, Katherine. “The Fiduciary Rule May Sound Boring, But Its Collapse Threatens Your Retirement.”
Bloomberg Businessweek. June 2018

Tim Nguyen

Fiduciary Rule

By Tim Nguyen, CFA®, CPWA®, CMT
Senior Vice President & Private Wealth Advisor


Articles In This Issue:

2018 Fourth Quarter Review and Commentary
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