Answer: All of them.
We talked before about the Financial CHOICE (some acronym that is unimportant) Act passed by the house. One of its fundamental premises is to “Empower Americans to achieve financial independence by fundamentally reforming the CFPB and protecting investors and retirement savings.”
It would make the CFPB (with a name change to the “Consumer Law Enforcement Agency (OTC:CLEA),” an Executive Branch agency with a single director removable by the president at will, and make the agency subject to Congressional oversight and the normal Congressional appropriations process. It would make the new acronym responsible for enforcing “certain” consumer protection laws. Establish an independent, Senate-confirmed Inspector General. (No word on how many stars.) Among its new functions would be to promote new investment products and choices with a streamlined application process and promote value creation for public companies and their shareholders. (I guess I missed the part about consumer protection. Oh well, we don’t have any now anyway.)
Of course, the CHOICE ACT will repeal the Department of Labor’s (DOL’s) fiduciary rule.
Last Thursday, the House Education and the Workforce Committee approved legislation that would kill the Department of Labor (DOL) fiduciary rule and replace it with an advice standard based on disclosure.
You have the “Affordable Retirement Advice for Savers Act.” Introduced by Representative Phil Roe (R-Tennessee), which is said to “protect access to affordable retirement advice by overturning the Obama administration’s fiduciary rule while ensuring retirement advisers serve their clients’ best interests.”
According to Rep. Roe, the Affordable Retirement Advice for Savers Act would “overturn the flawed fiduciary rule while improving policies governing financial advice to enhance protections for retirement savers.” It would, he argues, “strengthen retirement planning by requiring financial advisers to serve their clients’ best interests … Enhance transparency and accountability through clear, simple, and relevant disclosure requirements … Ensure small business owners continue receiving the help they need to provide retirement plans for their employees … Protect access to high-quality, affordable retirement advice so more Americans can retire with dignity and financial security.”
If the bill were passed and implemented as written, it would return the retirement advisory marketplace essentially to where it was before, as if the DOL Rule never happened
Also last Thursday, the House Appropriations Committee apparently (no transparency there) approved a DOL spending bill that would prevent the agency from funding the enforcement of the fiduciary rule. The disclosure bill goes to the House Ways and Means Committee before it is taken up by the full chamber.
And, at the same time the House Financial Services Committee also is working on legislation that would eliminate the DOL rule and replace it with a best-interest standard that would be proposed by the SEC.
It’s hard to keep track of all this, but there have been probably six or seven other bills tossed around Congress which would repeal, reform, delay for years, defund or otherwise stall or eliminate the whole fiduciary thing.
I say toss the rule. It’s pointless, because you cannot, repeat, cannot legislate ethics. A rule may change the process Big financial uses to sell things, but we know big financial is best at innovating product.
Last week, my article was "Fiduciary Isn’t Everything." I’m going farther here: “fiduciary” isn’t anything. We’re talking about the “ethical treatment of somebody else’s money.” That’s all. Simple. It would be nice if we didn’t need legislative dictates to dictate our behavior. (Who is writing the elected officials’ rules to dictate their behavior? And what good did that do?). But there are crooks among us that will prey on investors. No rule will stop them. If big financial loses the ability to incentivize sales, the salespeople will go independent. It’s already happening in droves for lots of reasons, including financial. That’s not a bad thing, it just is.
The well-known ERISA lawyer, Fred Reish of Drinker Biddle, says that the transition period of the ill-fated DOL fiduciary rule will probably be extended beyond the end of this year. “At this point, it seems likely that the DOL will propose changes to the fiduciary rule and exemptions. As a practical matter, this means the transition period will be extended, probably to the end of 2018 and possibly even longer.”
With all due respect to Counselor Reish, he didn’t go far enough. I have been betting that it will not see the light of day, and I say “Good riddance."
It is not up to some agency or some legislative dictate to protect us from some rogue sales people in the investing world. It is up to us. If we collectively or individually dumb enough to throw money at some investment newsletter or book that tells us there’s a “secret asset that nobody else knows about that will make us millionaires in days,” we deserve to be taken. Seriously?
If you or I buy the hyped $.22/share stock we see in that “personal” email from someone we don’t know that congratulates us on how well we did “last time” on their inside tip on a hot penny stock (no memory of that) because we believe what they say that it is going to skyrocket 15,000%, well then, we should have to write “pump and dump" 1000 times on the blackboard.
If we hire some financial adviser because he or she has so many designations on their business card that it is continued on the back, well, that’s good due diligence, isn’t it. We deserve what we get.
There are some bad helpers out there.
There are some good helpers out there.
And, there are some great helpers out there.
Learn how to tell the difference. Be cautious, be thorough, Don’t settle for less than great.
Rein in your ego and don’t let greed sneak in.
When Madoff was led away in cuffs in 2008 there was one commentator (a lawyer) who said the blame for his theft of $18 billion lies with the investors who gave him money. I thought what? Outrageous, but he was right. Those of us who gave him money listened to a smart, smooth-talking, glib industry icon who wouldn’t support his claims with any transparency into the “split strike conversion” magic he performed. We opened statements consisting of a number (positive, of course) every month and flaunted it. There was a tight “insider” clubbieness to having money with Madoff. It was all on us. He wouldn’t have existed without the ego-driven greed of investors who should have known better.
Forget fiduciary. Do your homework. Read unbiased, non-product pushing content. If you aren’t sure about an investment or a “helper” ask me. At least you’ll get an opinion.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: John Lohr represents Pro Bono 44 investors who lost $66 Million to Bernie Madoff. His somebodyelsesmoney.com provides investing education and content to individuals and institutions. He has a Seeking Alpha Premium Marketplace offering, THE FIDUCIARY SALE: IN SEARCH OF THE ETHICAL ADVISOR.