Follow The Money EP.77

The fiduciary rule, issued by the Department of Labor (DOL), was designed to ensure financial advisors always act in the best interests of their clients. While this is a noble goal, the rule could have unintended consequences, especially for smaller investors. Instead of offering more protection, it may end up raising costs and limiting access to financial advice for those it was meant to protect.

Why is the Fiduciary Rule Problematic?

Increased Costs for Advisors: To comply with the fiduciary rule, advisors face more paperwork and operational costs, which could translate into higher fees for clients, particularly those with smaller portfolios.
Less Access for Small Investors: The added regulatory burden could lead advisors to stop serving smaller clients, leaving them without financial guidance.
Conflicts of Interest in Implementation: While the rule aims to eliminate conflicts of interest in financial advising, some argue it might be the result of a conflict of interest itself—expanding government control over the financial sector.

Key Takeaways

The fiduciary rule could raise fees and limit access to financial advice for smaller investors.
Large firms may adapt more easily to the rule, leaving smaller investors underserved.
Financial advisors might be reluctant to offer recommendations due to increased compliance risks.
Conflicts of interest may still persist, despite efforts to eliminate them.

The fiduciary rule, while well-intended, may do more harm than good for smaller investors. It’s essential to stay informed about financial advice and be cautious of regulations that may unintentionally limit your options.

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