DOL’s Fiduciary Rule Brings Good News

The DOL and Your Retirement Account

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By Michael Zhuang,

[Principal of MZ Capital Management]
Contributor to Morningstar and Physicians Practice
Michael Zhuang
Recently the Department of Labor issued a fiduciary rule that requires financial advisors who manage retirement accounts to act in clients’ best interests.
Here is the quote from a Wall Street Journal report … 

About $14 trillion in retirement savings could be affected by the rule, which requires stockbrokers providing retirement advice to act as “fiduciaries” who will serve their clients’ “best interest.” That is stricter than the current standard, which only says they need to offer “suitable” recommendations, a standard that critics say has encouraged some advisers to charge excessive fees or favor investments that offer hidden commissions.

Still, reflecting intense lobbying from the financial industry, which has fought the regulation since it was first proposed six years ago, the final version includes a number of modifications. 

This might come as a surprise to many physician-executives and people that financial advisors do not need to act in clients’ best interests up until this day.  

Alas, as I explained in this article, there are really two types of financial advisors: those who have a broker license (series 7) and those who have a registered investment advisor license (series 65).

Here is the kicker:

93% of all financial advisors are licensed brokers. These are advisors from major Wall Street brokerages like Merrill Lynch, Morgan Stanley and etc., as well as many independent broker-dealers. By law, they do NOT need to act in clients’ best interests. 

Those who have a registered investment advisor license have always been required by law to act in clients’ best interests, but they account for only 7% of all financial advisors. 

The financial industry benefits tremendously from not needing to act in clients’ best interests, for instance, by selling clients high hidden cost financial products. That’s why they fight the fiduciary rule tooth and nail, and with the help of many Senators and Congressmen.

It’s better late than never. I am glad that seven years after the financial crisis that nearly brought the country to its knees, something is finally done to address the rampant conflict of interests in the financial industry. 

There is a caveat though. The fiduciary rule only applies to retirement accounts. So if you have a brokerage account and an IRA account with Merrill Lynch. Your Merrill Lynch broker needs to act in your best interests with your IRA account, but needs NOT with your brokerage account! 


The best way to check whether your financial advisor is a broker is to ask “Do you have a series 7 license?” If the answer is “Yes.” You need a second opinion review. Chances are good that it will find many hidden costs and bad investments.

More: The DOL’s Final Fiduciary Rule: What’s in it and what does it mean for advisors?


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One Response

  1. DOL

    Regulation Has Advisors Saying, ‘I’m Done’.



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