A friend recently hit me with this joke:
"Why did the hipster burn his mouth on the pizza? ...Because he ate it before it was cool."
Roaring laughter ensued.
"a person who follows the latest trends and fashions, especially those regarded as being outside the cultural mainstream."
Lately, financial advisors have been in the news because a new Department of Labor rule is bringing my preferred brand of advisory service into the mainstream. The fiduciary advisor.
A fiduciary advisor accepts the highest legal standard of care and must put the best interests of their clients above their own financial interests. And not just with lip service. A fiduciary is legally obligated to meet this standard and opens themselves up to liability should they breech their duty. This standard isn't new to the industry, but it applies to well less than half of advisors. The new Department of Labor rule says that any advisor to retirement assets must accept this standard of care.
As you might imagine, there has been a lot of push-back from Wall Street and the insurance industry about this new rule. They may ultimately succeed in having it rescinded. You see, such a high standard of care makes unnecessary and expensive financial products rather dangerous to sell. However, many non-fiduciary advisors, perhaps somewhat reluctantly, are accepting the new standard and announcing that they too are now fiduciaries.
Personally, I have mixed feelings about forcing financial professionals to accept a standard of liability they aren't willing to take voluntarily. I'm really not sure that will entirely help investors. It's also important to note that many professionals act honorably and ethically without being fiduciaries. Finally, on a selfish note, this rule makes it harder for us "legacy fiduciary advisors" to differentiate ourselves from competitors, as we've been able to do up to this point. We've accepted this standard for years. Before it was cool.