Posted March 3, 2017
The Fiduciary Rule
After more than a year of deliberation, the US Department of Labor (DOL) under President Obama issued a new regulation specifying how all financial advisors in regard to retirement accounts should be held to a fiduciary standard. This new Fiduciary Rule is scheduled to take effect on April 10, 2017.
Up until this new rule, brokers and insurance agents have been held to a lower standard known as the Suitability Rule. The context for the Fiduciary Rule is Advisor Beware because the duty of care rests with the advisor to act in the best interests of their clients. The context of the Suitability Rule is Buyer Beware because the duty of care rests with the clients to know what is good or bad for them. When litigation is brought against brokers who give bad advice under the Suitability Rule, a college degree can be used against the client: You are educated; you should have known better.
Going back to the founding of Bell Investment Advisors in 1991, I am proud to have signed up for the fiduciary standard from the very beginning. On February 3, President Trump directed the US Department of Labor to consider revising or rescinding the new Fiduciary Rule. If the department concludes that the rule is out of step with the administration’s policies (anti-regulation), the executive memo recommends that the department should revise or rescind. There are three options on the table for the DOL: delay the rule, weaken the rule, rescind the rule. With any of these three outcomes, Barbara Roper from the Consumer Federation of America writes: “Brokers and insurance agents can now go back to recommending what is most profitable for them rather what is best for their customers.”
The Market Is Up Because of Strong Corporate Earnings Growth
With earnings season almost complete for Q4 2016, corporate earnings show a 4.6% increase over the same period last year. This fact is independent of the economic expectations for the Trump Administration, which are also driving the market higher. For the past five years, corporate earnings have been growing at a 3% annualized rate.
The 10-Year US Treasury yield began 2017 at 2.45%, and the yield declined to 2.36% by February 28. This drop in interest rates has been good for the bond market over these first two months, which has helped our Stable Growth Strategy (Class 4 and 5) and given our Fixed Income (Class 5) allocations a solid start to the year. We always welcome your calls.
Jim Bell, CFP®
President, Chief Investment Officer
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You may know a young woman, 18 – 30, who could benefit from attending the YWCA’s tenth annual Young Women and Money Conference. This conference is designed to help young women gain financial independence and success. Attendees will learn about good credit, budgeting, paying bills, and investing. Oakland Mayor Libby Schaff will give the opening […]