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Department of Labor fails to protect consumers and what you need to do


Deregulation is in the blood of this administration so it's no surprise that the onus is increasingly on you, the consumer, to make sure that your finances are in good order and that you're not being taken advantage of.

The Department of Labor (DOL) recently announced a delay in the implementation of the fiduciary rule “until 2019, at the earliest”^1. The fiduciary rule was intended to enhance responsibilities of financial advisors to their clients, increase transparency of fees, and remove various conflicts of interests.

The DOL rule was to establish a fiduciary relationship between brokerage firms and their clients. A fiduciary is someone that has to put his clients’ interests before his own. As Ben Steverson of Bloomberg wrote, “While some (brokerage firms) are already fiduciaries, required to put their clients’ interests first, most advisers must merely recommend products that are 'suitable' to client needs, a term open to wide and profitable interpretation.”^2

Brokerage firms have spent millions of dollars preparing for this rule. Their legal counsels have created additional documentation, disclosures, and paperwork for clients to sign, including the Best Interest Contract Exemption, which basically maintains firms' ability to charge commissions^3. However, no amount of paperwork will eliminate the profit motive and abundant conflicts of interest.

It's crucial that you engage in a fiduciary relationship with your financial advisor. It's also important that you understand all conflicts of interest that your financial advisor has, as he or she manages your investments.

At Eureka Wealth Management, I am a fiduciary for my clients as part of their financial planning engagement. I also reduce conflicts of interest by having no shareholders, managers, or sales quotas that must be met. I cannot collect commissions and fee transparency is at the core of what I do. I am not bound to any single product and have flexibility among products. Also, I am a CERTIFIED FINANCIAL PLANNER™ and am required to follow the code of ethics and disclose any potential conflicts. Contact me at (760) 537-0791 or online at eurekawealthmanagement.com or Facebook.

Sources:

^1: https://www.ft.com/content/1cc22f20-c096-11e7-9836-b25f8adaa111

^2: https://www.bloomberg.com/news/features/2017-06-07/fiduciary-rule-fight-brews-while-bad-financial-advisers-multiply

^3:L https://www.investopedia.com/terms/b/bestinterest-contract-exemption-bice.asp

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Eureka Wealth Management is a registered investment adviser in the State of California. The adviser may not transact business in states where it is not appropriately registered, excluded or exempted from registration. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment advisory services. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.