Content Dam Diq Online Articles 2017 09 Sept De Thumb

Is your financial advisor a fiduciary?

Sept. 13, 2017
Financial experts discuss the new DOL's fiduciary rule, and now it applies to dentists and their financial advisors. Here's what dentists need to look for.

Financial experts discuss the new DOL's fiduciary rule, and now it applies to dentists and their financial advisors. Here's what dentists need to look for.

During the last 18 months, the financial services industry has been buzzing about the Department of Labor’s new fiduciary rule. The media has done an excellent job of providing coverage of the new rule, as it will be a significant step toward increased investor protection. While the proposed rule was first scheduled to be applicable on April 10, 2017, the rule was officially applied on June 9, 2017.1

At the heart of the new fiduciary rule is the history of how financial advisors have been regulated, and the duty of care they must display in regard to their clients’ investment recommendations. Many investors do not realize that there are two separate financial regulatory bodies—the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC). FINRA-governed advisors, generally those advisors working for broker–dealers, are held to a “suitability” standard when making investment recommendations. SEC-governed fee-only registered investment advisors are held to a higher “fiduciary” standard of care. While it is important that advisors make recommendations that are suitable for their clients’ individual situations, the suitability standard falls short when compared to the higher fiduciary standard requirement of making recommendations that are in the best interest of the client.

The new fiduciary rule is important because it seeks to eliminate this discrepancy of advice by requiring all advisors to adhere to the higher fiduciary standard of care when providing advice to retirement plan accounts. This covers company-sponsored retirement plan accounts, but also includes Individual Retirement Accounts (IRAs) and Roth IRAs. While the higher fiduciary standard of care is preferred, doctors need to understand that this can be both beneficial and problematic.

For investors who are currently working with advisors to manage their retirement plan accounts, the fiduciary rule is an exciting advancement. Advisors across the industry will now be required to make investment recommendations that are truly in the best interests of their clients, not in the best interests of the advisor’s payout. For doctors who are trustees and plan sponsors of their company retirement plans, the new rule allows for further discussion about using an advisor who can also serve as an ERISA 3(38) fiduciary to assist with the duties and risks of managing a qualified retirement plan.

For investors working with traditional commission-based advisors, a word of caution: Carefully assess the implications of the fiduciary rule specific to these types of fee structures. Traditional commission-based
broker–dealers may be migrating these accounts toward wrap fee accounts to adhere to the new fiduciary standards. This could mean an increase in fees relative to current commissions, and trading costs for low turnover accounts.

While the final impact of the Department of Labor’s Fiduciary Rule remains subject to ongoing debate, the concept has already created meaningful changes in the financial services industry. Several national
broker–dealers are implementing new policies to align with the rule, regardless of the final compliance standards.

In our view, the new fiduciary rule has the potential to be a great step forward for the financial services
industry. We believe that the spirit of the rule will help to protect investors and ensure they receive the most objective advice in a complex financial world. All changes come with important considerations, to which we would recommend that doctors speak with their current
advisors to ensure they understand the impact and implications of the new rule.


1. DOL Fiduciary Rule. DOL Fiduciary Rule website. Accessed July 28, 2017.

Brett Miller, CPA, CFP, provides investment advice through McGill Advisors, a division of Brightworth LLC. Both are members of the McGill & Hill Group LLC, your one-stop resource for tax and business planning, practice transition, legal, retirement plan administration, CPA, and investment advisory services. Visit

John K. McGill, JD, MBA, CPA, provides tax and business planning for the dental profession and publishes The McGill Advisory newsletter through John K. McGill & Company Inc., a member of the McGill & Hill Group LLC.

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