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Fiduciary advocates push alternative approach to DoL rule

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Fiduciary advocates are going on the offensive even as the Department of Labor's rule appears to be dying a slow death.

Investing legend Jack Bogle, the Institute for the Fiduciary Standard and a group of advisers are promoting a set of fiduciary best practices for planners to adopt.

Their efforts will help ensure investors have better access to fiduciary level advice, even if the Labor Department's rule is overturned or watered down, they say.

"Whatever happens in Washington, this about doing the right thing for investors," says adviser Michael Zeuner, who is also a board member at the institute. "We think that will stand the test of time."

The Labor Department has proposed delaying the fiduciary rule's implementation date by 60 days in order to complete a review President Trump ordered in a February memorandum. A comment period on that proposed delay ended March 17. Trump's memo also laid out guidelines for revising or rescinding the regulation.

Senator Elizabeth Warren (D-Mass.) and Trump's nominee to lead the department, Alexander Acosta, traded barbs over the fate of the regulation during Acosta's nomination hearing earlier this week. Acosta, while declining to spell out his view on the regulation, vowed at the hearing to carry out Trump's review if he is confirmed as secretary.

"I've been doing this for 35 years and for the first time people are coming in and asking hard questions: 'Are you a fiduciary?' These best practices help me make that case," says William Prewitt, founder of Charleston Financial Advisors.

Bogle, founder of Vanguard and a member of the institute's board, expects the industry to eventually adopt a fiduciary standard because increasing numbers of clients will demand it.

"No one can stop it," he says. "The genie is out of the bottle. Investors are aware of the costs."


In what the institute calls its "first class," more than two dozen RIAs have signed onto the best practices, which lay down 12 guidelines for professional conduct standards. These standards include avoiding conflicts of interest, fully disclosing those that are unavoidable and affirming one's fiduciary status in writing to clients. In December, the first RIA firm to join the registry was Moisand Fitzgerald Tamayo, headed by Dan Moisand, a former FPA president.

"So the tasks that are included in the best practices are many already being done by advisers who are diligent about their fiduciary obligations. But make no mistake, these best practices go further than what the SEC would require of an investment adviser," says attorney Brian Hamburger, who is general counsel to the institute's best practices board.

William Prewitt, founder of Charleston Financial Advisors, says these best practices will help solidify client relationships.

Stocks and Puerto Rican bonds are the focus of many cases among clients, advisers and firms.
March 10

"I've been doing this for 35 years and for the first time people are coming in and asking hard questions: 'Are you a fiduciary?' These best practices help me make that case," says Prewitt, who is based in Charleston, South Carolina.

The institute's leaders hope these advisers will evangelize others, and ignite greater awareness among clients of what standards of conduct their planners are actually held to.

"I think the intensity and the interest among advisers is paramount," says Knut Rostad, president of the institute. "We don't have any sales target in terms of the number of advisers needed to make this program successful."

Indeed, the advisers joining the initiative say they plan to vigorously advertise their fiduciary principles to current and potential clients.

"We are going to be loud and public with our commitment to the program," says Zeuner, who is affiliated with WE Family Offices and is based in New York.

David Lewis, a Knoxville, Tennessee-based planner, has already been explaining what the best practice to his clients via newsletters, blog posts and social media.

"Whatever the government does in terms of how they define fiduciary, we can always draw the distinction and be relentless about being public about what we are doing. If it doesn't meet our standards, we can show to our clients how we are overcoming that," he says.

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