It Seems Like We Touched A Nerve

Columbus, Ohio

“Much ADOO About nothing”

On his arrival from London recently, Shakespeare observed tens of thousands of brokerage firm executives, working with several million investors, frantically re-categorizing their brokerage accounts to “fiduciary” status, or to non-discretionary status, as desired by the client.

According to sources available to Bill, each conversion required 10- to 60-minute conversations with each investor, client review of five pages of disclosures, signatures on two documents, manager and regional manager review of each document, hand input and scanning of documents and information into massive data storage banks, 12- to 16-hour days for reps, daily overtime for sales assistants, and a substantial supply of Ibuprophen. He wondered how firms will pass on these expenses.

Bill further learned that this massive effort is a result of a judicial opinion solicited during a four-year campaign by The Financial Planning Association. Assuming, at first, that the campaign, and related expenses, must have a concrete, tangible, beneficial purpose, Bill asked “what is a fiduciary?” Strangely, he found that no one could answer. Nothing had changed. “The risks of investing in intangibles,” he said, “have been well known since the time of the East India Companies. Those risks are down markets, bad companies, inflation, poor judgment, incompetence, and, on occasion, unscrupulous behavior.”

“Since ‘fiduciary status’ does not modify risk,” Bill said,” I cannot determine why this change is necessary.” He then spent several hours trying to determine whether the story is a tragedy or a comedy. His conclusion was comedy, which he titled: “Much Adoo About Nothing.”

John Guy, CFP

Wealth Planning & Management

Indianapolis, Indiana