As we’ve written about many times, Meridian has been compliant with the 2016 Department of Labor fiduciary rule, as we have been fiduciaries since Meridian was founded in 2015. To us, it just makes sense that your advisor should have your best interests in mind at all times! As fiduciaries, we have the legal obligation to act in our client’s best interests always—besides which, it is just the right thing to do…
So, the Department of Labor fiduciary rule that caused much moaning and groaning in the brokerage industry never really bothered us. We were more concerned that the rule would confuse the issue event more, and that individuals would have a hard time telling the reluctant fiduciaries—who comply only with the letter of the law (and had many exceptions from compliance)—from the willing fiduciaries, who built their practices around their clients’ best interests.
Interestingly, that 2016 DOL fiduciary rule was defeated for the first time this March by an appeal to the 5th Circuit Court by organizations representing independent brokers, security industries, and insurance and annuity agents. As this excellent article by Michael Kitces points out, their very argument was that brokers, insurance agents, and annuity providers are inherently salespeople and should not be held to the fiduciary standard as any advice that they give is INCIDENTAL to the sale of their product!
In the court documents, the product distribution industry argued that brokers are not in a position of “trust and confidence” and were merely performing regular everyday business transactions:
Relationships that lacked that special degree of “trust and confidence”—such as everyday business interactions—were long-recognized as non-fiduciary. For this and other reasons, a person acting as a broker ordinarily is not a “fiduciary” and similarly that “an agent who receives a commission on the sale of a product is not paid for “render[ing] investment advice… She is paid for effecting the sale.” -FSI & SIFMA in representing their brokers to the Court
It is crazy to us that the courts agreed—that folks turning over their life savings and future financial security to a broker is considered to be “an everyday business transaction”! And, that brokers are really not held to positions of trust and confidence with their clients! WHAT?
However these court battles turn out for the brokerage industry, Meridian’s position remains unchanged. We want to build long-term, trusting relationships with our clients. We want to earn a high degree of trust and confidence from our clients. And, we do offer advice—unbiased, comprehensive, fiduciary advice—and do not sell products!! We take our clients’ financial futures very seriously…as a fiduciary should…