The new search engine and website are also a shot over the bow at what fiduciary advocates see as recent policy blows to investor protection. Not only were the Department of Labor’s fiduciary requirements recently vacated by the Fifth Circuit Court of Appeals, leaving retirement investors who work with brokers without fiduciary protections, the Securities and Exchange Commission’s new “best-interest” proposals for brokers does not hold them to a fiduciary standard.
The four groups launching the website want to even the playing field for smaller investors.
“NAPFA members have a longstanding tradition of providing advice under a fiduciary standard to all clients, large or small, at all times,” NAPFA CEO Geoffrey Brown said. “Many NAPFA members work with investors who have limited assets or income due to age, occupation or health issues. In the end, NAPFA members take great pride in helping small investors become large investors. It’s what we do.”
While traditionally advisors have been known to charge investors based on assets under management, advisors on the website charge smaller investors an hourly fee or on a monthly retainer.
“We know real advice is not incidental. It’s the opposite: It’s why we exist,” said Sheryl Garrett, CEO and founder of the Garrett Planning Network. “If you want advice from someone who has chosen to put your interests ahead of their own, look no further than to members of one of these participating organizations.”
By law, a registered investment advisor must put his or her client’s interests first. In contrast, a broker is required only to deliver suitable products and services and is not prohibited from selling customers products that pay the broker the most money. Courts have affirmed many times that advice is “incidental” to brokers’ product sales.
Morningstar’s Szapiro added, “The simplest and most convincing study finds that commissions paid to broker/dealers influence the funds they recommend reducing investors’ returns,” Szapiro said.