Fiduciary Fight Continues: Financial Advisors' Daily Digest

by: SA Gil Weinreich


The fiduciary rule you thought had passed is currently on trial in a courtroom in Texas.

Jeff Miller and Kevin Wilson examine infrastructure spending – its funding and effects.

Ronald Surz details three broad approaches to portfolio management.

Three years' worth of gnashing of teeth regarding the Department of Labor's proposed fiduciary rule reform may come to naught depending on the outcome of a trial now taking place in a Dallas courtroom. Early reports of hearings that took place Thursday seem to suggest that Judge Barbara M.G. Lynn may be taking a dim view (see here and here, for instance) of the government's authority to impose the rule and could decide to vacate. I don't believe court observers' reading of tea leaves is any more sufficient to warrant such a conclusion than was the evidence that all but determined a Hillary Clinton victor earlier this month.

Even if Lynn, a district court judge appointed by Bill Clinton, sides with the financial services industry against the government, that does not mean an end to the fiduciary rule, but more likely the start of a new hearing before the Supreme Court.

It is indeed possible that the Department of Labor exceeded its authority in using ERISA regulation to bring about a fiduciary requirement, but there is nothing stopping the industry from voluntarily imposing such a standard on itself through its own self-regulatory organization. Were it to do so, changes could be brought about in a more orderly way. As it is now, there is a lot of uncertainty hanging over the heads of non-fiduciary investment professionals.

If full-blown fiduciary reform (as opposed to the current mishmash) were implemented, many vested interests would likely suffer from the dislocation. But years afterwards, those advisors who formerly acted in a non-fiduciary capacity would probably be kicking themselves as to why they hadn't made the move earlier. Ultimately, financial institutions will only thrive when their operating under one clear standard is recognized and appreciated by the public.

Let us know your thoughts in the comments sections, and below please find a few advisor-related links to start your week: