The ABCs of Behavioral Biases (O-R)
Written by Andrew Hunt
Written by Jason Hiley
When a hard-won historic milestone is achieved, it’s usually front-page news: Apollo 11’s “one giant leap for mankind.” The fall of the Berlin Wall. Martin Luther King’s “I have a dream.” … Last week’s fiduciary ruling by the Department of Labor (DOL).
About that last one. If you heard the news, you probably spotted it in the business section or on a financial newsfeed. With the ruling, anyone offering you advice about your retirement assets will be legally required to do so according to your highest interests, regardless of any conflicting incentives or dual roles they may have.
That’s the DOL’s ruling in principle. In reality, it only applies to advice related to retirement account assets such as those held in your 401(k) or IRA. Also, the ruling was watered down by several last-minute compromises that might (1) limit how effectively it can be applied, and (2) dilute the strictest definition of an investor-adviser fiduciary relationship with unnecessary exceptions to the rule. This New York Times overview offers a helpful summary of the issues involved. The author concludes: “[T]he quality of the advice you receive can still vary based on the provider you are working with.”
In short, the DOL’s ruling won’t eliminate every bad thing that can happen to a good investor – not even close. Still, we believe in this small step, and applaud its aim to become a giant leap in the right direction. For all of its flaws, the rule appears to be generating improvements. In anticipation of it, several large financial firms have already begun adjusting conflicted business models, shifting toward more efficiently managed products and lowering inflated prices.
Why would we want to advance a rule whose mission is to level the playing field between those of us who have been serving our clients’ highest interests all along and those who are making obligatory adjustments to catch up?
Most of all, it’s the right thing to do. We always have, and always will believe in the strictest definition of fiduciary. This means we will always applaud improvements that better protect investors’ interests, even if they might make running our own business a little more challenging.
Besides, we are not afraid of the challenge. By design and intent, we are and will remain an independent, fee-only Registered Investment Advisor firm, dedicated to advising you on how to best manage your wealth – all of your wealth – according to your goals and challenges. We are and will remain dedicated to being transparent and caring and fiduciary. With or without any regulatory requirements, this is what we do; it’s who we are. It’s bred in our bones.
We prefer focusing on doing all we can for you across all of our actions, large and small, according to our long-standing mission. As the DOL rule begins to (hopefully) improve on the retirement planning advice that all investors receive, we welcome any questions you may have about its impact on your own interests.