Fidelity Ends ‘Point In Time’ Fiduciary Service

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Two months ago, I commented on the absurd idea of Fidelity’s “point in time” fiduciary service, commenting, “Since a fiduciary has a duty of loyalty. Being a fiduciary, by definition, means an ongoing relationship.”

Now Greg Iacurci writing for InvestmentNews has a followup article that Fidelity has abandoned the idea of being a fiduciary even for a moment in which he writes:

Fidelity Investments will no longer serve as a fiduciary when it helps employers select investments for their 401(k) plans, moving away from a policy the firm adopted last year in response to the Department of Labor’s fiduciary rule. …

“It doesn’t surprise me they’re backing away from it,” said Chad Larsen, president and chief executive of advisory firm MRP. “If they don’t have to say that’s a fiduciary function, why would they?”

The Department of Labor’s rule forced sales people to act like a fiduciary. Many firms claimed that the rule is unfair because although they may pretend to give advice, they don’t actually give any real advice. Next the Securities and Exchange Commission (SEC) wrote an even weaker set of regulations which gave non-fiduciaries an even better marketing term than “fiduciary.” They are now allowed to use the term “best interest” even thought it doesn’t actually mean the client’s best interests.

We find the practices of much of the financial services industry repulsive.

But we believe it is good when sales people do not pretend to be a fiduciary.

If your company runs a retirement plan, someone at the company has the fiduciary responsibilities even if they don’t know it. They have a responsibility to periodically review the plan to ensure that it is being run in the best interest of the participants. Failure to review the plan is a litigatable offense. And if they don’t know how to review a plan, we offer a free review for retirement plans in the central Virginia area. To get started, you only need to give us a call today.

Photo by Craig Whitehead on Unsplash

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David John Marotta is the Founder and President of Marotta Wealth Management. He played for the State Department chess team at age 11, graduated from Stanford, taught Computer and Information Science, and still loves math and strategy games. In addition to his financial writing, David is a co-author of The Haunting of Bob Cratchit.