How Pay to Play May Be Holding You Back

February 22, 2017 | by James Behr Jr & Christopher Paleologus

In our previous article, we discussed how President Donald Trump ordered the Department of Labor to review the investor protection rule, otherwise known as the fiduciary rule. The review was to determine if the rule would cause any likely harm to investors, including the price of advice, industry impacts and increased litigation.

While many now expect the rule to be delayed or drastically changed, the rule may have even more nuanced effects than just the fiduciary obligation for advisors to act in the best interest of their clients. This brings us to one action many investors and advisors don’t know exists; the term is pay to play.

Here’s how it works: large integrated brokerage houses providing advisory services will require providers of investments such as exchange-traded funds (ETFs) or mutual funds to pay fees, either on total assets or dollar amounts annually up to $10,000 per fund. While the fiduciary rule may force the advisor to act in the best interest of the client, the brokerages will still be benefiting at the expense of the client.

By demanding ETF and mutual fund companies pay to be included in the list of the available investment choices, higher fees and fewer choices will most likely be passed through to the clients. The added access fees are often included in expense ratios or convoluted disclosures that are difficult for almost anyone to decipher.

Having a fee-only fiduciary advisor you can trust to always act in your best interests with no conflicts of interest should be one your highest priorities when choosing an advisor. Blue Bell Private Wealth Management is a fee-only investment management firm located in suburban Philadelphia. With over 80 years combined experience, the partners and team of Blue Bell Private Wealth Management have been dedicated to helping clients maximize their financial goals. Please feel free to email or call to find out how Blue Bell Private Wealth Management can help with your financial needs.


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