There is currently a struggle going on in the financial services industry that centers around Financial Conflicts
of Interest. Some “professionals” just don’t want to be considered a fiduciary. There are currently two
existing standards that a financial advisor can consider when giving advice:
1. Is the advice suitable for the client (more transactional based)
2. Is the advice in the best interest of the client (being a FIDUCIARY)
This struggle has been brought to the press because the Department of Labor (DOL) is now requiring that
anyone who is helping an individual make decisions regarding their 401k, or rolling over their 401k to an IRA,
be held to a fiduciary standard.
So what’s the fuss about? On the surface, it appears there may not be much difference between the two
standards. The bottom line is that almost all of the products out there could be considered “suitable” for
many people. However, many of those products are not necessarily in the best interest of the individual
I recently consulted with a couple who had 100% of their investable assets in Equity-Indexed annuities (not
including checking and savings). The product had a 15-year surrender charge even though the wife was over
70 years old! Was the product suitable for her? Maybe, maybe not. Was it in her best interest to put 100%
of her investable assets into an Equity-Indexed annuity? NO. Are Equity-Indexed annuities the only product
that potentially have this problem? No, there are no shortage of products being sold that have a large frontend
fee or that are incentive based.
The DOL wants financial advisors to:
1. Give advice that is in the investor’s best interest and acknowledge their fiduciary status in writing
2. Charge no more than reasonable compensation and refrain from incentive based products
3. Make no misleading statements and fairly disclose fees, compensation and material conflicts of
NorthWest Financial Services Inc. acts as a fiduciary. We believe the new DOL rules will be largely
inconsequential for our firm. Frankly, we would aim to act in the client’s best interest whether we are
required to or not.
I am really at a loss as to why any financial advisor would not want to act in the best interest of his/her
If you have any questions regarding the DOL ruling, please let us know.
Bill Reno CFP®