What’s the Difference Between Using a Fiduciary or Sticking With My Current Broker? By: Gabriel PotterMBA, AIFA® 2015.05.06

The short answer:  about $17 billion.

Describing the benefits of intangible, abstract concepts like “duty” or “avoiding conflicts-of-interest” leave some people cold.  Yes, we know there are scary court cases that demonstrate the value of using a fiduciary… but the risk of being sued seems so far away from day-to-day operations for a business or charity.  You might accept that, from a legal perspective, the value of using a fiduciary adviser to assist with satisfying your duty is high, but unquantifiable.

So, if you prefer numbers, we have a few.  The Council of Economic Advisors published a study which suggests that conflicts of interest cost investors $17 billion each year.  This study is available online, if you want to read for yourself.

https://www.whitehouse.gov/blog/2015/02/23/effects-conflicted-investment-advice-retirement-savings

Given savings like this, you can see how the Department of Labor’s estimates shows that investors could save more than $40 billion over the next ten years by adopting the expanded fiduciary standard for retirement advisors; $40 billon is on the low side of their estimates, and remember that this rule only applies to particular advisory relationships.  There are other relationships which will continue doing their lucrative business as usual. 

Gabriel Potter

Gabriel is a Senior Investment Research Associate at Westminster Consulting, where he is responsible for designing strategic asset allocations and conducts proprietary market research.

An avid writer, Gabriel manages the firm’s blog and has been published in the Journal of Compensation and Benefits,...

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