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Family Investment Center Whitepaper Addresses Changing Role of Investors and Advisors

Whitepaper Highlights Key Observations on Fiduciary Standard and How it Affects Advisors 

 

Our investment advisory team at Family Investment Center has watched carefully as both the U.S. Securities and Exchange Commission and Department of Labor have wrestled in the past year with changes to fiduciary standards. Among other areas, these changes may prevent brokers and advisors from offering conflicted advice (selling products to gain commissions) to investors. As a commission-free investment advisory firm, we have always maintained a client-first approach.

We stand as a beacon for the idea that a fiduciary standard does not eliminate quality investment advice for middle-class people in America. We have outlined these ideas and others in a newly published whitepaper titled “The Changing Roles of the Investor and the Investment Advisor: How ‘Conflicted Advice’ is Changing the Conversation About Investment Success.”

We feel that a strict fiduciary standard allows our clients to prosper. We recently crafted this whitepaper to highlight how proposed changes will benefit investors. The paper offers a brief analysis of the rules and some practical implications. This is a complex situation, and we hope you’ll share this information from genuine practitioners who are already making the fiduciary standard work.

The first topic in the whitepaper weighs heavily on a 2015 report from the White House that addresses potential losses investors see through conflicted advice. Remarkably, over a 30-year period, investors who take conflicted advice could see up to a 12 percent loss in growth potential in their IRAs. Conflicted advice can lead to less productivity because commissions motivate the advisor rather than recommending what’s actually best for their clients.

In fact, investors are estimated to lose around $17 billion a year due to conflicted advice, according to the White House report. Fee-based advisors are at the center of this controversy because they often operate on a commission rather than a flat fee, which can make them a non-objective source of investment information. Family Investment Center has always operated as a “fee-only” fiduciary, meaning that our advisors have never taken commissions.

Also covered in the whitepaper is the rise of robo-advisors. These are automated programs that really appeal to the DIY investor, but unfortunately are built on flawed financial theories.  For example, while Modern Portfolio Theory is intended to maximize expected returns while taking into account the amount of risk a client is willing to take, with robo-advisors, current market conditions are left out of the equation and the program doesn’t get to know the investor.  This impersonal approach is often inadequate.

The new fiduciary rule is also addressed in the Family Investment Center whitepaper. This rule would impact anyone who is paid for their advice regarding retirement plans. The rule would require that all advisors act impartially and in the client’s best interest. President Obama is working to fast-track the rule as the Department of Labor continues to gather feedback from the investment community and others.

Investors should seek non-conflicted and unbiased advice, found in investment advisors who aren’t motivated by a commission and instead work in the best interest of their clients. It’s the way Family Investment Center professionals have always operated, and it’s why we are able to establish strong relationships with our clients. Contact us today and let’s discuss your investment needs.

 

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