Twenty-somethings today are an interesting breed. They grew up in a world with so much access to information and diverse opportunities, but they also witnessed the messiness of a recession and increased exposure to corruption through social media.
This has left them with an understandable distrust for corporate authority and an ability to do their homework as they look for how to invest in their future. When looking into retirement plans and 401(k) options, they’re likely to view financial advisors with the same skepticism one would feel with a used-car salesman.
They know that saving early is smart, and hear snippets of advice on shows like John Oliver’s Last Week Tonight talk about things like making sure you get a financial advisor that is a fiduciary. Before they can even say “fi-dush-a-what?!” they whip out their smartphones and ask Siri for some answers.
See, millennials may not be financial experts, but research is showing that they are wanting to find ways to invest well (1). In seeking out the advice of experts, the not-so-money-savvy can get lost in the lingo, uncertain of how to be wise with their investments without getting ripped off. A lot of young people are doing their research and asking hard questions of the people managing their funds. So when the Department of Labor launched a campaign to enforce a conflict-of-interest rule for financial advisors, millennials perked up their ears (2).
What exactly does this fiduciary proposal entail? A fiduciary is a trustee acting with integrity to best serve their client or beneficiary. Basically, the Department of Labor is putting rules in place that require financial advisors to provide the best possible plans for their clients, regardless of what’s in it for them.
That should be a given, but sadly it is not. While firms like Key Wealth Partners have always acted as a fiduciary on behalf of their clients, many investors receive huge kickbacks in hidden or subtle compound fees and hefty commissions on annuity contracts. These incentives lead some investors to recommend plans that end up benefitting their bank account more than the client’s investments.
This new rule will help shape the future of how all financial advisors work with clients, making life much more difficult for those shady stockbrokers. It will be put into effect in April of 2017, so the next few months will be a time of transition for much of the financial world. As of right now, not all advisors are required to act in your best interest.
Take a cue from these discerning millennials when seeking sound financial advice. These are just a few of the reasons that seeking a fiduciary advisor, like Key Wealth Partners is in your best interest.
1. Fiduciary Advisors Will Be Open and Transparent
With the new rules in place, financial advisors will need to be up front about how they will help you invest. Contracts with clearly defined roles and communication about the commissions they would receive will help clarify exactly what both parties would be gaining from the investments (3). This means no more too-good-to-be-true sales pitches with hidden fees and convoluted fine print. Advisors will need to be transparent about all of the options. This philosophy of integrity is at the forefront of everything we do at Key Wealth Partners.
2. Increased Accountability Eliminates Conflicts of Interest
Fiduciary advisors are required by law to present the best plan for each client, no matter what. Before, advisors would be allowed to present any plan that was “suitable.” This wide umbrella term left a lot of room for greedy advisors to present plans that weren’t best for the client in the long run. At Key Wealth Management, we take it a step farther and operate as a fee-only advisor. This means we never work for sales commissions, and our utmost goal is to see our clients succeed.
3. You Get to Call the Shots
The bottom line is that these new regulations are aiming to shift the market to help empower investors to make the best possible choices with their money. These regulations give clients the power to ask the right questions and demand to get the highest value for the service that advisors are providing. As a company in the financial world, we understand people’s skepticism towards the underlying motivations of some stockbrokers. While we have set out to help our clients invest their hard-earned money well from day one, it’s encouraging that rules are being put in place to ensure this across the board.
Whether you are a millennial just starting the research process for your future investments, or wanting a transparent conversation about the current state of your investments, it’s important to start asking the right questions of the financial world. At Key Wealth Partners, we would be happy to offer you a complimentary consultation. We have always been committed to providing the best possible plans for helping you achieve financial success. Call our office at (717) 283-4186 or email me at email@example.com to schedule a “Get Acquainted” meeting today.
David Niggel, CFP®, ChFC®, AIF® is the founder and president of Key Wealth Partners, LLC, an independent wealth management firm serving individuals, families, and business owners. Along with over a decade of financial services experience, he has advanced knowledge and training in providing holistic financial planning with fiduciary and ethical care, holding the CERTIFIED FINANCIAL PLANNER™, Chartered Financial Consultant®, and Accredited Investment Fiduciary® certifications. With hands-on entrepreneurial experience, he has the unique ability to help clients meet both their individual and business goals. Based in Lancaster, he serves clients through the York, Harrisburg, Hershey, and Central, Pennsylvania areas. Learn more by visiting www.keywealthpartners.com or connecting with David on LinkedIn.
(1) Corosa, C. (2016, October 11). Why are Millennials Suddenly So Interested in What “Fiduciary” Means? Retrieved October 13, 2016, from http://fiduciarynews.com/2016/10/millennials-suddenly-interested-fiduciary-means/?utm_source=BenefitsPro&utm_medium=ThisisWhatMillennialsReallyWanttoKnowAboutFiduciary&utm_campaign=101316z
(2) (n.d.). Retrieved from https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/dol-final-rule-to-address-conflicts-of-interest
(3) Ebix Consulting 3 Questions Answered About the DOL’s “Conflict of Interest Rule” 3 Questions Answered About the DOL’s “Conflict of Interest Rule”. (2016, February 15). Retrieved October 13, 2016, from http://www.ebix.com/blog/3-questions-answered-about-the-dols-conflict-of-interest-rule/