Blake Street

Blake Street
Chartered Financial Analyst
Certified Financial Planner®
Founding Partner & CIO  
Warren Street Wealth Advisors

There has been much discussion over the past several years regarding the need for a set of fiduciary rules mandating that financial advisors do what’s best for their clients. Seems a little hard to believe that any financial advisor would need to be told this, more on that later.

In April of 2016, the Department of Labor unveiled their final version of their fiduciary rules for financial advisors working with client retirement accounts. These rules may or may not ultimately be implemented. At the heart of this issue are the concepts of advice that is suitable for clients vs. what is in their best interests. Here is some background and our take on this issue.


The current rules governing brokers, registered reps and other financial sales types is called the suitability standard. This standard requires that brokers make recommendations that are suitable to the client’s situation. However, this standard does not require that the advice be in the best interests of the client. If you are confused by this distinction don’t feel bad, so are we.

Think of it like this. You go to a car dealer in search of a new car. You are single, you have no children and you never haul anything. A compact or mid-sized sedan meets your needs and is the best-fit car for you. However, the dealer makes more money selling large SUVs and persuades you to spend significantly more money to buy one. Technically the vehicle is suitable for you, it will get you from point A to point B and it is a car. But buying the SUV was not really in your best interest in terms of the cost, gas consumption, etc.

The suitability standard is enforced by FINRA, a self-regulatory agency governing the conduct of brokers and reps.

Best interest

The fiduciary standard means that financial advisors holding themselves out as fiduciaries will act in the best interests of their clients. All investment recommendations and any other financial advice they render must be done with your best interest in mind.

Using the car dealer analogy, if you went to a Chevy dealer looking for an SUV but the dealer knew that the similar-sized SUV made by Toyota was really the best vehicle for you, they would be duty-bound to recommend that you buy the Toyota. We’re guessing there is no fiduciary standard for car dealers!

Registered investment advisors (RIAs) at both the federal and state levels must adhere to a fiduciary standard that requires them to act in their client’s best interests. Warren Street Wealth Advisors is a fiduciary not only because we are required to be, but because we feel that the only thing that matters is doing what’s best for our clients.

The DOL rules

The DOL unveiled their fiduciary rules in April of 2016. The intent was for the rules to be fully implemented in April of 2017. The Trump administration has delayed final implementation. There is some confusion about what’s next, some say the rules will be implemented, others are not so sure.

The DOL rules state that financial advisors providing advice on a client’s retirement account must act in their best interest. The biggest change is likely to involve IRA accounts and smaller 401(k) plans. Technically a broker could act as a fiduciary regarding your IRA and treat your taxable brokerage account in accordance with the suitability standard.

What we’ve seen in brokerage world is a move towards fee-based accounts and a move away from commissions in IRAs. If eventually enacted, these rules will impact both brokers, and to a lesser extent RIAs as well.

What does this all mean to me?

The financial services industry does a great job of confusing the investing public, too often on purpose in our opinion.

The terms “fee-only” and “fee-based” are confusing and are often misused by financial advisors. Fee-only means that the only compensation earned by an advisor are from fees paid by the client. There are no commissions paid, no imbedded fees paid to the advisor that are hidden inside the financial products being recommended. This is how we work with our clients at Warren Street. We feel this puts the interests of our clients first and eliminates the potential for conflicts of interest that can arise when commissions are involved.

Fee-based arrangements are becoming more popular in the brokerage world. Fee-based is also sometimes called fee and commission. The advisor might charge a fee for a financial plan or perhaps invest your money in a fee-based investment account. However, they may also earn commissions from the sale of certain products like annuities or insurance. They may also earn commissions from the fee-based account through payments from the mutual funds being used in the account.

Bottom line, if you aren’t sure if your advisor is acting in your best interests ask them if they are a fiduciary and have them put this in writing.

If they contact you in the wake of the DOL rules and tell you they are now acting in your best interest, ask them what they were doing in the past. In short NEVER settle for any financial advice that falls short of being in your best interests. This is what you and all clients deserve!

Please feel free to contact us at 714-876-6200 or to learn more about our services and our status as a fiduciary.

Blake Street is a Founding Partner and Chief Investment Officer of Warren Street Wealth Advisors. Blake graduated from California State University, Fullerton in 2009 with a Bachelor of Arts in Finance, and  he is a CERTIFIED FINANCIAL PLANNER™ (CFP™) and a Chartered Financial Analyst (CFA).

Disclosure: Blake Street is an Investment Advisor Representative of Warren Street Wealth Advisors, a Registered Investment Advisor. The information posted here represents his opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional.  Nothing in this commentary is a solicitation to buy, or sell, any securities, or an attempt to furnish personal investment advice. We may hold securities referenced in the blog and due to the static nature of content, those securities held may change over time and trades may be contrary to outdated posts.