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What Does the New DOL's "Conflicts of Interest" Rule Mean to You? By Michael Koenig, Founding Partner/CEO FirsTrust

Wed, Jan 11, 2017 at 1:55PM

What Does the New DOL's "Conflicts of Interest" Rule Mean to You? By Michael Koenig, Founding Partner/CEO FirsTrust

On April 1, 2017, the Department of Labor’s new "Conflicts of Interest" (COI) rule will require financial institutions to act in the investor’s best interest.

The new Rule would prevent financial institutions from pushing sales quotas, or paying bonuses and other incentives, "…that are intended, or would reasonably be expected, to cause Advisers to make recommendations that are not in the Best Interest of the Retirement Investor." 

Consumer fairness comes to Wall Street. Halleluiah. Angels are singing. Let’s celebrate.

Hey... wait a minute... why isn’t this already a rule?

Why are Wall Street institutions allowed to profit by intentionally manipulating financial "advisers" to recommend inferior investments?

How long has this been going on? Why is it happening so frequently that we needed a new law to prevent it?

And what do you mean the new Rule only applies to the "Retirement Investor"?

Are you kidding me?

Nope. Washington’s newfound regard for consumer fairness is over 75 years too late and shortsightedly applies only to retirement accounts. Apparently, all your other personal investments, trust funds and college savings accounts are unworthy of such an elevated standard of ethics.

Wall Street has lobbied heavily against the Rule, and continues scrambling to prevent it from becoming enforceable.

But why bother?

  • If the new Rule is repealed, banks, brokerages and insurance companies will continue to pay incentives to "advisers" who sell investment products that are profitable for their company, but merely "suitable" for the investor. 
  • If the new Rule prevails, the same banks, brokerages and insurance companies who fought against it will proudly declare themselves "fiduciaries" (as if by choice), roll-out some "loophole" retirement product that technically complies, and continue to fill your non-retirement accounts with expensive, merely "suitable" products.

Prevailing or defeated, this will be a political win for Wall Street, but just another Washington stink-bomb for consumers; a brightly flickering fuse that ends with no bang.

All Financial Advisers are not created equally – so choose wisely.

About 5% of them are members of NAPFA (the National Association for Personal Financial Advisors). They maintain their objectivity by refusing to accept third party financial incentives, and they rebuke Wall Street quotas by remaining fiercely independent.

For over 20 years, FirsTrust been doing the right thing by choice, not by mandate.

We only hold licensing and registration to advise, not to sell. We always hold our clients in a fiduciary regard. And we gladly hold ourselves accountable under both State and Federal Law to serve the client’s best interest - all of the time.


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