by Sarah Hannibal

In the financial advisory business, one of the biggest challenges we face is the damage some investment advisers do to the reputation of our profession.  While the vast majority of advisers do the right thing for clients, it is perfectly legal for many investment advisers to exploit consumers’ lack of investment knowledge and sell investment products that have high commissions, hidden fees and restrictive features.  The horror stories about both young and old people paying ridiculous fees for poorly performing products are very real.  In fact, we see them when new clients come to us after disappointing experiences elsewhere.

To us, there are two types of advisers:

  • Fiduciaries – those of us who are legally obligated to put the client’s best interest first.
  • Not Fiduciaries – advisers that have to recommend “suitable” investments to their clients. They may put their client’s interest first but they are not legally obligated to do so.

Some advisers even split up their firms to have a Fiduciary side and a non-Fiduciary side.  This way they can market themselves as Fiduciaries but still sell high commission products like insurance, annuities, and loaded mutual funds.  (Disclosure: Walden Wealth is a fee-only Registered Investment Adviser with a fiduciary duty to act in the best interest of our client).


A year ago, President Obama directed the Department of Labor (DOL) to move forward with a proposed rule to require retirement advisers to abide by a fiduciary standard. The DOL estimates this rule would save investors 1% per year on their investments and billions of dollars over time.  This required Fiduciary standard would only apply to retirement accounts.  We think this should be an easy decision for our lawmakers to get behind and approve.  It would not be that hard to implement or regulate.  The benefits for the middle class during retirement would be huge and theoretically reduce the need for government support later in life.

The flip side of the argument is that this regulation is paternalistic and investors should be free to make their own decisions when presented with investments and the obligation should not be on the investment adviser.  Free choice is a good thing, right?  It would be if financial literacy was high.  Unfortunately, it is very low, and efforts to increase financial education have not resulted in much improvement.

Unsurprisingly, brokerage firms have lobbied hard against a fiduciary standard since it poses a huge threat to their business.

In weighing liberty or protection in this case, we believe the scales should be tilted heavily to protection.  A secure financial future is essential for America and Americans.  Walden Wealth’s bottom line: A fiduciary standard is the best standard of care, and the right thing to do for investors.