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151 Kalmus Drive, Suite C-150 

Costa Mesa, CA 92626 
(714) 850-0534 

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77-564 Country Club Drive #150

Palm Desert, CA 92211

(760) 350-5049

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To Be Or Not To Be (A Fiduciary), That Is The Question

February 13, 2017

GW Financial, Inc is a fiduciary; many financial advisors are not.  The Department of Labor (DOL) wants all advisors who provide retirement investment advice to be fiduciaries.  A fiduciary is bound by a standard of care to always act in the client’s “best interest.”  A fiduciary is legally required to make prudent investment recommendations without regard to their own interests, or the interests of those other than the client.  A non-fiduciary can dispense financial advice and sell products to clients that are “suitable,” but not necessarily in the client’s best interest.

Last April the DOL made a ruling designed to protect retirement savers from bad advice and products that are not in the client’s best interest.  The ruling essentially stated that when financial advisors recommend products or courses of action for retirement accounts, the advisor must act as a fiduciary and therefore that product or advice must be in the “best” interest of the client, and not merely suitable.
The DOL ruling caused an uproar in the financial services industry (including insurance companies) because non-fiduciary advisors would no longer be able to justify commission-based transactions that reward the advisor while avoiding recommendations that may be better for the client. These institutions and lobbying groups have filed lawsuits asking the government to delay implementation of the DOL fiduciary rule set to take effect April 1, 2017.

An example of a possible conflict of interest between a non-fiduciary advisor and a retirement investor would be when a broker, insurance salesman, or financial institution with its own proprietary products (e.g. mutual funds) invests your money in their own firm’s mutual funds, when a nearly identical mutual fund (i.e. similar underlying equities) with lower transaction costs and lower recurring management expenses would likely be best for the investor. 

Fee-only financial advisors like GW Financial are fiduciaries who do not sell products, do not receive commissions, do not benefit from transaction fees, and always act in the best interest of the client, whether it’s for investment advice or other financial advice.  Fee-only fiduciaries are compensated only with fees for service, whether it’s a consulting fee or a fee based on assets under management. There is no incentive to steer clients toward anything less than the “best” client course of action.  
Regardless of the outcome of the controversial DOL ruling, GW Financial and other fee-only advisors will continue “To Be” fiduciaries.

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