By Dan Moisand
In a recent piece, Jason Zweig quotes the former Republican U.S. Senator from New Hampshire who also serves as the chief executive of the Securities Industry and Financial Markets Association, Wall Street’s main trade group, Judd Greg. It was regarding a possible Department of Labor rule applying a fiduciary standard to IRAs. “It’s a dangerously large expansion that will chill all kinds of activity,” says Greg.
Greg goes on to say it “would be a disaster, a nightmare.”
Assistant Secretary of Labor Phyllis Borzi counters that “the [brokerage] industry is saying, in effect, ‘If you don’t allow us to continue to give conflicted advice, we won’t be able to give any.’”
She also notes that “there are lots of people out there who are already acting as fiduciaries, and they’re not bankrupt. They’re making money.”
In my last post, I discussed how the SEC has lost sight of its purpose, but it isn’t just the SEC that is off base. The whole discussion is focused on the wrong things.
The question being asked is how can the regulations be changed to allow industry to do things they otherwise wouldn’t be able to do under a fiduciary standard? SIFMA and other groups typically say they are happy to be fiduciaries but want exceptions or to be able to find safe harbor in disclosures.
We do not need regulations that give industry safe harbor, rather we need regulations that give the public a safe harbor. To protect the public, the SEC and other regulators should empower consumers with the ability to easily identify people that are willing to be held to a strong bona fide fiduciary duty.
This is incredibly simple to do, as I point out in my latest column for the Journal of Financial Planning. Instead of working on methods to exempt industry from certain requirements of fiduciary duty, regulators could simply declare, if you hold out as “fill in title here,” you will be held to full fiduciary duties all the time with no exceptions.
“Wealth Manager” Financial Planner” or most things one can think of with the word “advisor” all would be fine. Heck, I’d be happy if regulators just picked one.
The public doesn’t have an easy way to identify who works this way but they absolutely deserve the ability to find the people that are willing to work this way. Without exemptions. Without hiding behind undecipherable disclosures.
It would be a simple step in the right direction.
“There’s no mileage in it for anybody to come up with a rule that is unduly burdensome,” says Borzi. “But when people rely on experts for advice on what is probably the biggest chunk of money they’ve ever had in their life, the advisers have a responsibility to work for the clients’ best interests and not their own.”
Exactly!
