Over the past couple of months, I've had the opportunity to swim in two very different types of waters.

In April, I swam at Aquatic Park in the San Francisco Bay. The water in the Bay is cold.  Very cold.

The water in the Bay is also murky.  Very murky.

I couldn't see my outstretched hand in front of my face as I swam, and I wasn't too far from where a seal was savagely attacked by a hungry great white shark only six months prior. In my mind, I was faced with a couple of important tasks: 

• Keep hypothermia at bay, and 
• Avoid being shark bait in 57 degree, low visibility, shark infested waters

After a half hour of swimming, I was glad to make it to the sauna in one piece.

Last month, I swam the waters off of Grayton Beach, Florida. The water on the Florida panhandle is warm.  Very warm.

The water on the panhandle is also clear.  Very clear.

While there are smaller (apparently harmless) sharks in this part of the Gulf, the excellent visibility meant that I would've had no trouble spotting them 30 or 40 feet below me. My task in Florida was simpler than it was in the Bay: enjoy the swim.

My conclusion was that warm, clear water is more enjoyable than cold, murky water. Apparently the Department of Labor (DOL) has come to the same conclusion for people who receive financial advice.

On April 6, the DOL released the final version of its Conflict of Interest Rule for retirement advice under the Employee Retirement Income Security Act of 1974 (ERISA). The new rule amends a 40-year old statute to reflect realities of retirement saving and to advance consumer protections.

Under the new guidelines, the DOL is requiring that advisors who provide investment advice must be fiduciaries, that is they must act in their client's (not their own) best interest. If the advisor sells a high-commission product, if challenged, she or he would have to show how it's in the best interest of the client.

According to the DOL, retirement accounts lose $ 17 billion each year due to conflicted (non-fiduciary) advice. That's a lot of trips to the beach!

Why anyone would ever knowingly invest with an advisor who receives commission for selling a product is beyond me, but therein lies the issue: many "advisors" weren't doing a very good job disclosing the motivation behind the advice they were providing. They weren't informing the client as to other (potentially better) options available. And they weren't acting in the client's best interest. Clients who were working with salespeople instead of fiduciary advisors had no way of knowing what was lurking in front of them.

It doesn't seem groundbreaking to us that an advisor should be required to act in their client's best interest, but for much of the investment world, it's a Titanic shift.

The Grandfather Clause

Of course, there tends to be an exception for every rule. In this case, it is those clients who already have an agreement in place with a conflicted (non-fiduciary) advisor. Those agreements won't be affected by the new DOL guidelines. Instead, those advisors can continue to provide conflicted advice, and can continue to receive commissions from investment companies for selling a particular product.

So, if you're a current client of a shark, I mean, non-fiduciary advisor (most "advisors" are not-fiduciaries) , we suggest that you revisit your prior arrangement, and ask your advisor to sign an oath like ours. 

If they can't, we suggest you find a new advisor. We don't think you should have to worry about what's in the water; just enjoy the swim.