The End of the Fiduciary Rule and What It Means to You

As of June 21, 2018, The U.S. Fifth Circuit Court of Appeals officially vacated the Obama-era Fiduciary Rule-, a rule that sought to hold more financial institutions and advisors to a fiduciary standard of care and obligate them to act in their clients’ best interest. (1) The Department of Labor’s research found that Americans lose $17 billion a year due to conflicts of interest, namely in the form of hidden and/or excessive fees. In our experience, we have identified  fees and financial commitments from products clients determined they didn’t really need, that were sold to them in a less-than-transparent manner. One case that is still ongoing involves a U.S. investment advisory firm that was from the SEC for several securities violations, some of which included lying to consumers by telling them they were “fee-only” financial advisors when they were in fact earning sales commissions, failing to disclose significant conflicts of interest and substantially misrepresenting product tax benefits. In our experience, the overturning of the Fiduciary Rule is  a “win” for Wall Street and a loss for Main Street consumers.

What does this mean to you as a consumer? It primarily means that you will have to continue to do your due diligence when seeking out financial advice and products. The one bit of good news about all of this is that many consumers now understand what it means for an advisor to be a fiduciary, and they’ve learned that not all advisors are legally held to a fiduciary standard of care. Consumers will want to continue to ensure that any advisor with whom they work is indeed a fiduciary, i.e. that the advisor is obligated to provide advice that is in their best interest and is not being motivated by a desire for sales commissions or any other form of conflicted compensation. The best way to avoid these conflicts of interest is to work with an advisor who is a fee-only planner, which means they don’t get paid in the form of sales commissions, and all of their compensation comes directly from the client on a fee-for-service basis. This is not to be confused with “fee-based;” fee-based advisors are what are known as dually-registered advisors, which means they can still get paid in the form of sales commissions and could provide advice that is not in the client’s best interest. It’s also important to make sure any advisor with whom you work acts in a fiduciary capacity 100% of the time. Some advisors, namely fee-based advisors, can operate as a fiduciary for one part of an engagement, and then put on their sales hat to sell commission-based products for another part of the same engagement.

According to language from former Department of Labor Secretary, Alexander Acosta, stated in early May of 2019, the DOL was working with the SEC to resurrect the fiduciary rule.(2) There are are still a lot of unknowns about whether or not its final product will provide any useful protections for consumers. In the meantime, it’s a “buyer-beware” environment out there and, as was the case prior to the fiduciary rule, a consumer’s best course of action is simply to work with a fee-only financial planner who acts in a fiduciary capacity 100% of the time.


(1.) Loan Syndications and Trading Association. “Mandate Department of Labor’s Fiduciary Rule.” Accessed May 19, 2021. (2.) House of Representatives Education and Labor Committee. “Examining the Policies and Priorities of the U.S. Department of Labor.” Accessed May 19, 2021.

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