Market Volatility and the Fiduciary Proposal

As summer starts winding down many people are anxious about what’s next.  For my kids, it was waiting on a letter to find out who their next teacher was going to be. For many others it is a new school or parents learning to adjust to life as their children go off to college.  Now the recent market volatility has also caught our attention and makes us wonder what’s next.

Market fluctuation — investors want to talk

When the stock market has major adjustments down, those invested want to talk with someone.  This someone might be the financial professional they have worked with for years, or it might be a call center.  Many times they want education about what is going on with the market, but others are just looking for someone to help them reallocate to what they feel is an alternative that may help safeguard retirement funds.  While each situation is different, most financial professionals remind the caller about saving for the long-term and discuss goals and best way to meet the goals.

Fiduciary proposal may change the conversation

The DOL fiduciary proposal may really change the outcome of these calls in the future.  If this type of interaction will push many into a fiduciary capacity, they may decide to just process the request of the caller rather than provide additional education.  While no one can predict the outcome in this scenario, it does go against a very old market adage “buy low, sell high” and seems this may lock in losses in too many situations.

If the intent of the proposal is to protect the consumer and do what is in their best interest, it seems we would want to protect the current content of these calls.  Sometimes the emotion of the moment is enough to cause a bad decision and if there is not someone on the other end of the call to listen and educate we may not be putting consumer interest first.

I’ve got my kids off to school now and hopefully just like for them, the stock market will settle back into a more normal routine.  Now we’ll have to see if the recent hearings and the over 2,600 comment letters produces a result that most everyone agrees is more rational.

Do you think the DOL fiduciary proposal may change the conversation you are having with your clients during market fluctuation? If so, let’s chat in the comments.

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Affiliation Disclosures

The subject matter in this communication is provided with the understanding that The Principal® is not rendering legal, accounting, or tax advice.  You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.

 Insurance products and plan administrative services are provided by Principal Life Insurance Company a member of the Principal Financial Group® (The Principal®), Des Moines, IA 50392.

© 2015 Principal Financial Services, Inc.

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