How to Take Charge of Your Financial Destiny and Protect Yourself from Charlatans

How to Take Charge of Your Financial Destiny and Protect Yourself from Charlatans

If a positive could be gleaned from the devastating market crash of 2008, it was the promise of widespread reform designed to protect individual investors by putting their interests first.

Cajoled into action by an angry public that demanded accountability after being forced to bail out the very financial institutions that caused the crash, the three major financial planning organizations in the United States came together to address the issue.  On December 8, 2008 Certified Financial Planner Board of Standards, Inc., The Financial Planning Association® and the National Association of Personal Financial Advisors announced that they would work together to pursue consumer protection and industry reform.  This announcement culminated in the formation of the Financial Planning Coalition.

Members of the Financial Planning Coalition committed to collaborate with Congress to undertake regulatory reform to achieve the following objectives:

  1. Financial planning services be delivered to the public with fiduciary accountability and transparency.
  2. Financial planning services be specifically regulated to distinguish and differentiate professionals who have met essential requirements to practice financial planning with ethics modeled and enforced by the Certified Financial Planner Board of Standards.
  3. Make it easy to identify the financial professionals who embrace and enthusiastically adhere to these standards.

Wow!  What a noble cause.  For a while, it looked like the Fiduciary Standard would be required for all financial advisers. It appeared that the Financial Planning Coalition was gaining traction.  It took time but the Department of Labor was about to impose new rules regarding the conduct of ALLpersons in the financial services business providing “advice” to folks regarding retirement and financial planning.  Alas, it was not to be.  The fiduciary rule, known officially as the “conflict of interest” rule, states that advisers have to give conflict-free advice on retirement accounts, putting their clients’ needs ahead of their own compensation.  That means shifting away from commissions on investment products and becoming completely transparent on what they do and the advice they provide.  The reason the battle over this rule was so deeply fought comes down to one thing – MONEY!  The White House Council of Economic Advisers estimated investment companies collect about $17 billion annually due to conflicted investment advice to retirement savers.  That money serves to enrich financial services companies at the expense of investors.

Based on the foregoing information you should be dismayed to learn that the U.S. Fifth Circuit Court of Appeals recently struck down the Labor Department’s fiduciary rule.  It’s official: The DOL fiduciary rule is dead for now!

So, Where Does This Leave You?

You have four options.

  1. Be so disgusted with our government’s lack of advocacy that you never invest again. Unfortunately, this is akin to “sticking your head in the sand”, ignoring your future retirement and financial needs.
  2. Work with a conflicted adviser (stock broker). Probably not a good choice, but it is unfair to believe all are bad.
  3. Do it yourself by personally fulfilling your fiduciary obligation to yourself. This is a huge task but if you absolutely love the financial arena, then go for it.
  4. Work with a Registered Investment Adviser (RIA). RIAs are legally required to place your interest before theirs.  This means total transparency.  It helps if you and the adviser have good chemistry.  If you go this route, pick one that is a true financial advocate.

In my next post, I’ll lay out all the things that should be done to optimize your chances for financial success and the good life.  I’m going to make it clear and easy using the“KISS”rule which stands for, Keep It Simple Stupid!

May you live well and prosper.

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