When big news is announced in your industry, take the opportunity to share your distinct point of view by sharing a press release. Here is an example from my husband Steve Juetten, who also released a new book this week titled Ditch the Guesswork: Creating Reliable ROI for Time Starved Investors.
Bellevue Certified Financial Planner Steve Juetten is worried about the false sense of security some people will 
have after hearing about the new Department of Labor rule, which requires advisers who work with retirement plans and IRAs to be a “fiduciary.” According to Juetten, a fiduciary is someone who always puts the best interest of their client first and operates with fee transparency. But, as he cautions, the new legal guidelines, which went into effect April 6, muddy these waters and make it easy for pretty much any adviser to call him or herself a fiduciary. This makes it more dangerous for the average person because it will be more difficult to identify when an adviser is truly acting in an investor’s best interest.
Juetten believes that the Labor Department bowed to intense industry pressure and watered down the new regulations to the point where they are almost pointless. “The intent of the regulations is positive, but the way they were written basically allows advisers to keep doing what they have always done and claim they are following the fiduciary rules. This is scary. Based on the reading of these rules, I have no idea what the Labor Department thinks it means to work in a client’s best interest.”
He says Wall Street believes the new law is good thing for the companies that sell investment products and provide financial services more so than for investors. Stock prices for brokerage firms like Ameriprise jumped almost immediately after the guidelines were published. The stock of LPL, the largest independent broker/dealer in the county, shot up 7% at one point on the day the regulations were announced.
Juetten cautions investors about what he sees as several flaws in the new Labor Department guidelines.
- They only apply to an adviser when they are giving advice to participants in retirement plans like a 401(k) plan or an individual retirement account. Juetten observes that if an adviser is giving advice about a brokerage account, the adviser does not have to act in the client’s best interest. The adviser only has to give advice that is “suitable” for the investor. “This is a vague and dubious standard,” Juetten says.
- Juetten warns, the new regulations don’t go into effect for at least a year. Some parts of it start in April 2017 and some parts start in 2018. In the meantime, it’s the usual buyer beware approach.
- The new rules allow an adviser to be paid in a variety of ways that are not easy to decipher or understand. Advisors can still be paid in commissions or use other sales-based compensation structures and still claim to be a fiduciary. Juetten says that the only way that an individual can be certain an advisor is working only in their best interest is to ask three questions:
1) Is the adviser a fiduciary? YES is the right answer.
2) Who pays the adviser? The client pays the adviser.
3) How much is the adviser getting paid for selling a product or service? Fee transparency is key.
Finally Juetten says that the new guidelines give advisers wide latitude to recommend whatever they want to a retirement client as long as they meet some very low standards. Juetten observes that by the Labor Department’s own admissions, the hurdles to meeting the fiduciary requirement were lowered substantially. He warns investors to be wary and believes this regulation is more about the exceptions and how to legally get around the fiduciary intent than it is about protecting the average person.
Juetten notes that most investment products, such as complex annuities that were sold to unwary and unsuspecting clients before the new guidelines, are still going to be sold. For example, an adviser can sell a product from his company’s lineup and not tell the client if there are other products from a competitor that might be better or cheaper or both while still being able to claim that he is a fiduciary. “Advisers are free to sell pretty much anything they want as long as fees aren’t egregious and conflicts are disclosed,” says Juetten, who wonders how an average investor will be able to determine if fees are fair and doubts they’ll read the small print on disclosure documents.
CFP Steve Juetten shows busy professionals how to take care of their money so they can do more of what they love since 2002. Steve has contributed expert insights to Bankrate.com, PBS.com, Forbes.com, MSNMoney.com, FOXBusiness.com, and the Puget Sound Business Journal. Seattle Magazine has awarded Steve a FIVE STAR WEALTH MANAGER honor for five years in a row based on client votes of satisfaction. His passion for financial planning and investing took root while he was in high school. Juetten has always enjoyed organizing financial data and learning about financial markets. Today he applies those passions to help clients identify and make their financial dreams come true on a fee-only, fiduciary basis.
>> To schedule interviews with Steve Juetten, call 425-373-9393 or send email to Steve@finpath.com.
>> To sample the first two chapters of the book, visit ditchtheguesswork-pinkspoon.com.
