Trump Legislative Changes and the Importance of Fee-only Financial Planning

Today the Associated Press and other media outlets are reporting that Donald Trump is expected to begin the process of potentially rolling back financial services firm regulations that were enacted to protect the interests of consumers. The two pieces of legislation at risk are the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Department of Labor's Fiduciary Rule. Dodd-Frank, as it's commonly known, was enacted in response to the Great Recession and, among other things, it created the Consumer Financial Protection Bureau (CFPB). The CFPB's intent was to protect against predatory lending practices and make it easier for borrowers to understand the terms of their mortgages. The Fiduciary Rule, enacted in 2016, was in response to Department of Labor's research that found that Americans lose $17 billion a year to conflicts of interest with financial advisors, primarily as a result of excessive and hidden fees, sales commissions, and other conflicted forms of advice that line the pockets of financial advisors. I've written at some length about the Fiduciary Rule and why it's needed here. President Trump, at this point, is only calling for a review of Dodd-Frank, but he's officially suspending the Fiduciary Rule's scheduled implementation for an additional 90 days. It's important to note that the Fiduciary Rule received wide support from all the major financial planning associations, including the Financial Planning Association (FPA), the Certified Financial Planner Board of Standards, as well as the National Association of Personal Financial Advisors (NAPFA).

What does all of this mean for the consumer of financial services? It means that now, more than ever, the consumer of financial planning services should only work with a true, fee-only fiduciary advisor. Fee-only financial planners and wealth managers represent the gold standard in the financial services industry because, by law, they must put the interests of the consumer ahead of their own at all times. Most of these advisors are members of NAPFA, and they take a fiduciary oath to never get paid in the form of commissions, referral fees, or other conflicted forms of payment.

 

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