In Perspectives

Some of you may or may not be aware that the Department of Labor just published the final rules of an important piece of regulation called “Fiduciary”; Conflict of Interest Rule—Retirement Investment Advice.  Before I get in depth as to what this rule means for investors, let’s define it.  The term fiduciary comes from the Latin word fiducia meaning “trust.”  A fiduciary is a person who has the power and obligation to act for another under circumstances which require total trust, good faith and honesty.  In investment world terms, this means that a financial advisor must act solely in the best interest of their clients.

The reason why the DOL chose the rule for IRA’s and 401(k)’s and no other investment accounts was to protect middle-class investors.  A majority of Americans have their assets in retirement-focused accounts and have not accumulated plan balances that are sufficient to maintain their standard of living in retirement.  Although a number of factors have contributed to inadequate plan balances, subpar investment returns due to high fees undoubtedly play a part.

So what does this rule do for you? In essence, the new rule imposes a best-interest test on those who provide advice on retirement accounts, including IRA’s and 401(k)’s.  Previously, in the commissioned broker-dealer world, incentives existed for brokers to put retirement savers into investments that would simply meet much looser suitability standards.   Not all broker-dealers did this, but the incentives existed, potentially at the cost of investors purchasing these products.  Fiduciaries, on the other hand, are bound by the “best interest” standard and must place their needs behind that of their clients.  In most cases they do not work off of commissions but rather a fee for service to avoid this potential conflict of interest with investment advice.

In the end, this rule will be better for retirement savers as they should receive less conflicted advice because it will be driven by fiduciary concerns rather than by incentives to put customers in expensive products.  These changes will be important for those who opt for brokerage accounts in 401(k) plans, for those considering rollovers from 401(k)’s to IRA’s, and for those making ongoing investment decisions in IRA’s.

At Legacy Trust, the fiduciary standard is nothing new to us.  As a Michigan trust only bank, we have been bound by this rule not only for IRA’s but for trust administration, investment management and family office services since we started 12 years ago.

Legacy Trust and Your Right to Financial Privacy

At Legacy Trust we have established policies and practices that respect the financial privacy of all individuals who use our trust company. We believe it is critical to comply with the laws and regulations designed to secure your financial privacy. Your relationship with us as our client is very important to us, and we want you to understand our policies and practices about handling your information.

This Policy applies to you – This Policy applies to our relationships with individual clients who inquire about or obtain products or services from us for personal, family and household purposes.

Strict security measures – We take the security of information very seriously. We have established security standards and procedures to prevent access to client information. We maintain physical, electronic and procedural safeguards to guard client information.

Limited employee access – We have established procedures to limit employee access to information to only those employees with a business reason for accessing such information. We educate our employees about the importance of confidentiality and client privacy. We take appropriate disciplinary measures to enforce employee responsibilities regarding client information.

Why we collect information – We collect information about you to:

  • accurately identify you;
  • protect and administer your records, accounts and funds;
  • help us design or improve our products and services;
  • understand your financial needs;
  • save you time when you apply for new products and services; offer you quality products and services; and comply with certain laws and regulations;

We collect information – We collect and maintain your personal information so that we can provide investment management and other services to you. The types and categories of information that we collect and maintain about you include:

  • Information we receive from you to open an account or provide investment advice or other services to you (such as your home address, social security number, telephone, financial information and investment objectives).
  • Information that we generate to service your account or from our transactions with you (such as account statements and other financial information).
  • Information on your transactions with nonaffiliated third parties.

We have established procedures so that the financial information we collect is accurate, current and complete. We are committed to work with you to promptly correct any inaccurate information.

Our selective sharing of information – In order for us to provide investment management and other services to you, we do disclose your personal information in very limited instances, which include:

  • Disclosures to nonaffiliated companies as permitted by law, including those who help us service your account (such as providing account information to brokers and custodians).
  • Other limited disclosures as permitted by law, for example, required reports to government entities.

We do not share your information with third parties for marketing purposes. We do not sell your information.

Former clients – If you end your relationship with us, we will continue to adhere to the privacy policies and practices described in this notice.

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USA PATRIOT Act

Important Information About Procedures For Opening A New Account

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account.

What this means for you: When you open an account, we will ask for your name, address, date of birth and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.

We apologize for any inconvenience this may cause; however, federal law prohibits us from waiving these requirements.

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