The fiduciary rule is officially dead

[audreyh1]

Quote:

Originally Posted by OldShooter Well, 1% is 25% of 4%. The 11% extra assets number roughly makes sense, too. It's sort of like the price of an annuity that pays the FA. 1%/11% is about a 9% "annuity payout." Maybe a little rich but not wild

Um - we had already gotten the 1% is 25% of 4% part. The discussion was whether the fee hit is really 25% of the annual withdrawal or something else.

I think Kitces came with 1% AUM fee equating to about 0.4% hit on a 4% withdraw (3.6% remaining). Thus you lose 10% of your annual income to the 1% AUM fee, so you need 11% more assets to get the same as no-fee annual income.

Hey - it is the same answer!

[Dtail]

Quote:

Originally Posted by audreyh1 Um - we had already gotten the 1% is 25% of 4% part. The discussion was whether the fee hit is really 25% of the annual withdrawal or something else. I think Kitces came with 1% AUM fee equating to about 0.4% hit on a 4% withdraw (3.6% remaining). Thus you lose 10% of your annual income to the 1% AUM fee, so you need 11% more assets to get the same as no-fee annual income. Hey - it is the same answer!

I knew I liked Firecalc (and Kitces).
The math now makes sense.

[OldShooter]

Quote:

Originally Posted by corn18 Nope.

There are no letters that can be placed after a person's name that will indicate or guarantee that he/she is a fiduciary.


If you ever decide to commit to this guy, please run a brokercheck and insist on a letter confirming that he will act as a fiduciary in all aspects of yours and your wife's relationship with him. Ideally, such a letter should be signed by both him and by his compliance officer.

[Clone]

Quote:

Originally Posted by OldShooter And without running a brokercheck?

Would a financial advisor with a Series 66 and Series 7 have any validity based on their report on borkercheck? What would I find on brokercheck that would either be a positive or a negative?

[OldShooter]

Quote:

Originally Posted by Clone Would a financial advisor with a Series 66 and Series 7 have any validity based on their report on borkercheck? What would I find on brokercheck that would either be a positive or a negative?

I checked a guy like that one time and he had 21 customer disputes, mainly for "breach of fiduciary duty" and settled for amounts running into six figures. The report also showed that his employment ended a couple of weeks after the employer was notified of the final complaint. He must have been a helluva producer for them to have held onto him for so long.

Brokercheck also gives employment history, so a checkered past might be a worry point. Also I would not want to deal with an FA who just entered the business a couple of years ago. I have seen that on brokercheck once in a while.

Using the exams to determine fiduciary status is fraught, but IMO it is still a good thing to look at. Someone with only a Series 7 can be an "investment Advisor Representative" of a firm that is a Registered Investment Advisor and inherit the fiduciary responsibility, but individual RIAs are the ones with Series 65 or 66. But even there it is my dim understanding that in some insurance sales situations the person does not have to act as a fiduciary. I also had a Series 65 guy one time claim to me that he could sell load funds to clients. Maybe someone here knows more.


I have a Kitces bookmark: https://www.kitces.com/blog/the-4-di...r-fiduciaries/ I have not looked at it in a long time but you might find something useful there too.

[corn18]

Quote:

Originally Posted by OldShooter There are no letters that can be placed after a person's name that will indicate or guarantee that he/she is a fiduciary. If you ever decide to commit to this guy, please run a brokercheck and insist on a letter confirming that he will act as a fiduciary in all aspects of yours and your wife's relationship with him. Ideally, such a letter should be signed by both him and by his compliance officer.

I asked if he was a fiduciary, he said he was. Just looked him up on brokercheck and it has lots of info but nothing negative that I could find. Here's all his letters: CLU, ChFC, CASL, CLTC, CFP, ChSNC, RICP

[OldShooter]

Quote:

Originally Posted by corn18 I asked if he was a fiduciary, he said he was. Just looked him up on brokercheck and it has lots of info but nothing negative that I could find. Here's all his letters: CLU, ChFC, CASL, CLTC, CFP, ChSNC, RICP

That's quite a string. What you have to understand is that those designations are sold by various non-profits who make a business out of issuing credentials based on the purchaser satisfying certain criteria. So there is an inevitable conflict of interest. For example, the guy who runs the CFP thing makes over $1M/year. He needs to have a lot of CFPs out there paying annual dues. Having the credentials is probably better than not having them, but none of them have any legal teeth if the holder breaches the issuer's standards.

Fiduciary is different. It's a legal responsibility. You can go to court and allege breach of fiduciary duty if you get a bad actor. If he says he's a fiduciary that's good, but he should then have no problem giving you a letter to confirm.

Probably he's a really good guy, but remember you are not trying to find a friend. You are trying to hire someone to do a job. It's fundamentally no different than hiring a lawn service, except that with a lawn service it's easier to evaluate the quality of the work and any damage they cause is probably only temporary.

[CaliKid]

Quote:

Originally Posted by OldShooter There are no letters that can be placed after a person's name that will indicate or guarantee that he/she is a fiduciary. If you ever decide to commit to this guy, please run a brokercheck and insist on a letter confirming that he will act as a fiduciary in all aspects of yours and your wife's relationship with him. Ideally, such a letter should be signed by both him and by his compliance officer.

I believe CFP has adopted a fiduciary standard starting in 2019 fwiw.

Also, one friend of mine is an AIF and I believe they have a fiduciary standard.

My financial advisor is a CFP but more importantly I have watched him work with my clients for 20 years. I chose him out of the 100 or so FAs I know.

I have never heard of asking an FA to sign a fiduciary statement. I have seen salespeople sign a lot of stuff that didn't mean squat so not sure what it really means. I'd rather work with a person I like and trust and they do their job so I can focus on mine. Once I am retired I might see it differently but not now.

Also, just because a person is a fiduciary doesn't mean they will charge you cheaper fees. It just means they will better disclose and not double dip. I have seen some "fiduciaries" charge very high fees. You still need to look at the fees no matter what letters they have, what they sign, etc....

[OldShooter]

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Originally Posted by CaliKid I believe CFP has adopted a fiduciary standard starting in 2019 fwiw. ...

Yes, they have a new code coming on line (next fall, I think) that approximates fiduciary responsibilities. A Good Thing. I learned about that here, maybe from you. But all they can do if someone violates the code is to kick them out. I suppose the code could be cited in court but in the end the legal relationship is between an individual and his client. The CFP board is not in the deal.

Agreed, too, that fiduciary doesn't mean lower fees, competence, or guarantee that the FA is not dishonest. But I think it is an important selection criterion nevertheless and does provide a degree of legal protection to the client.

RE judgment, I'd venture to say that most people considering or using FAs have nothing like the level of competence and skilled judgment that you have. It is really them that the fiduciary standards are meant to protect.

[Bigdawg]

Had a few questions regarding 401K issues. Will be a few K short on my primary 401K for 2018 (highly compensated employee issue). I wanted to put the shortfall into a solo 401K. I have 1099 income from sports officiating. Wanted to ask him about the two separate 401K's totalling 18.5K for the year and also if I could withdraw from the solo at 55. Walked into my local military CU. Not PENFED. I won't mention which CU. The FA had zero clue what I was talking about. He couldn't understand why I couldn't just increase and get to the 18.5 in my primary 401K. He definately didn't understand solo 401K's and didn't know the 55 rule. I walked out shaking my head. That guy get's a pay check?

[CaliKid]

Quote:

Originally Posted by Bigdawg Had a few questions regarding 401K issues. Will be a few K short on my primary 401K for 2018 (highly compensated employee issue). I wanted to put the shortfall into a solo 401K. I have 1099 income from sports officiating. Wanted to ask him about the two separate 401K's totalling 18.5K for the year and also if I could withdraw from the solo at 55. Walked into my local military CU. Not PENFED. I won't mention which CU. The FA had zero clue what I was talking about. He couldn't understand why I couldn't just increase and get to the 18.5 in my primary 401K. He definately didn't understand solo 401K's and didn't know the 55 rule. I walked out shaking my head. That guy get's a pay check?

In my experience bank FAs are people that failed at other brokerage houses and only know how to sell annuities and maybe CDs a fall back.

[MarieIG]

http://www.ca5.uscourts.gov/opinions...-10238-CV0.pdf

The decision.

[corn18]

Quote:

Originally Posted by OldShooter That's quite a string. What you have to understand is that those designations are sold by various non-profits who make a business out of issuing credentials based on the purchaser satisfying certain criteria. So there is an inevitable conflict of interest. For example, the guy who runs the CFP thing makes over $1M/year. He needs to have a lot of CFPs out there paying annual dues. Having the credentials is probably better than not having them, but none of them have any legal teeth if the holder breaches the issuer's standards. Fiduciary is different. It's a legal responsibility. You can go to court and allege breach of fiduciary duty if you get a bad actor. If he says he's a fiduciary that's good, but he should then have no problem giving you a letter to confirm. Probably he's a really good guy, but remember you are not trying to find a friend. You are trying to hire someone to do a job. It's fundamentally no different than hiring a lawn service, except that with a lawn service it's easier to evaluate the quality of the work and any damage they cause is probably only temporary.

Thanks OldShooter! We decided not to use him at this time. I like futzing with the financials right now and since I went boglehead it's really quite simple and very boring. My only concern is my wife taking over if I die. But I have gotten 10 minutes a month to brief her on what we have and how it's invested, so she won't be completely lost.