SteelPeak: Out Front in Client Care

Blog - 7 - 04 - 16

Earlier this week, federal officials released new rules for professionals who provide financial advice. When you hear the new rules, you may wonder what took them so long.

The regulations, put out by the Department of Labor, require wealth advisors to make sure that any retirement investments they recommend to clients are in the best interests of those clients. It sounds like a no-brainer, but the fact is that most of the advisory industry operates under a much looser standard.

The majority of advisors adhere to what’s known as the “suitability standard.” That standard allows them to take their own profit into account when deciding which investments to recommend. This vague rule has been criticized for enabling conflicts of interest throughout the industry. And until now, advisors giving retirement advice have not been required to disclose their conflicts of interest to those they’re advising. That’s about to change.

The tougher new standard is known as the fiduciary rule. It won’t go into effect for most advisors until 2018, but Steel Peak has always acted under the fiduciary standard. When we organized our company, we decided to do so as a Registered Investment Advisor firm. RIAs are subject to the fiduciary standard, and we felt that our clients deserve nothing less.

It’s worth noting that the financial services industry fought for years against the Department of Labor’s tougher new standard. That’s despite the fact that the non-fiduciary advice cost retirement savers as much as $17 billion per year, according to the DOL.

One major caveat here is that the new rules apply only to advice on retirement savings. Money that is held outside of retirement-savings accounts is not subject to the fiduciary standard. At Steel Peak, all of our advice—on retirement and non-retirement investing alike—has always been based on what’s in our clients’ best interests.

Big Wall Street firms have always been concerned that tougher rules will dent their massive profits. We would not be surprised if they challenge the new rules in court. The bottom line is this: When investors are deciding where to turn for investment advice, there is a clear choice. They can turn to those who had to be compelled to put their clients’ interests first. Or they can turn to providers like Steel Peak who have always felt a duty to put their clients’ interests first.