Earlier this summer, the Fifth Circuit Court of Appeals revoked the U.S. Department of Labor fiduciary rule, which required that financial advisors and brokers act in the best interest of their clients when overseeing retirement accounts. The court vacated the rule after the Trump administration opted not to pursue a Supreme Court appeal of the panel’s initial split decision against the Department of Labor. Essentially, the Fifth Circuit decided that the DOL did not have the legal authority to issue a regulation changing the definition of a fiduciary.

Although the fiduciary rule is dead, its spirit and intent will live on. The regulation was crafted to protect consumers seeking advice from financial advisors. It stood for the principle that advisors need to avoid conflicts of interest and act in the best interest of their clients, not their firms or for their personal gain. Advisors should offer investment recommendations based on the client’s investment goals and risk profile, not because products generate fees.

Many large investment banks and investment advisors welcomed the fiduciary rule. In fact, a significant number of the big and reputable banks and advisors have indicated they will maintain a fiduciary rule standard for the advice they provide, even though it no longer has regulatory force, as a way to promote consumer confidence in their services. And, of course, courts will still hold financial institutions to common law fiduciary duty if they don’t adhere to the internal standards they have set.   

The rule has resulted in a more aware investing consumer. Visit WealthManagement.com to read the top ways in which it has altered the landscape for financial advisors and their clients.