Telltale Words: Key to Fiduciary Opposition Is in Its Language

My, my, it sure sounds as if whatever the DOL is proposing, it sure must be bad. And sure enough, those wacky folks over at the Department of Labor have cooked up the cockamamie notion that investors who put money into Individual Retirement Accounts (the operative word here being “retirement”) should be afforded the same fiduciary protections as investors in all other retirement and pension plans. I know, it sounds crazy on the face of it, but upon reflection, maybe the DOL has a point here, that’s reflected even in Mr. Brown’s objections. 

The courts have ruled over and over again that, under the Investment Advisers Act of 1940, when one provides “investment advice” one is subject to a fiduciary standard. All the DOL is doing is closing a loophole in its regulations that has allowed brokers to advise IRA holders without that standard. So the DOL is actually in perfect agreement with Mr. Brown when he advocates “providing unbiased, independent advice.” The rub is that the FSI seems to feel that if IRA “advisors” were held to a fiduciary standard, they could no longer “afford” to deliver their advice.   

This very common securities and insurance industry rationalization flies in the face of both common sense and the financial industry’s experience over the past 20 years. As the securities industry has been dragged—kicking and screaming—to convert its retail business from commissions to fees, its revenues haven’t gone down, they’ve gone up, way up. What’s more, there’s absolutely no evidence to suggest that a fiduciary standard is more costly. Quite the contrary:  It is fiduciary independent advisors who are fearful of being regulated out of business if subjected to FINRA’s draconian rules-based approach. 

In fact, it is a fiduciary standard’s tendency to level the economic playing field for small, independent advisors that threatens the FSI and SIFMA and their constituencies of large B-Ds. Which is why they’ll use any rhetorical trick, no matter how lame, to defeat or delay expanding such a standard on any front. So, yes, Mr. Brown, while the FSI is calling for the DOL’s  rulemaking process to be suspended until a comprehensive impact assessment had been completed, there is such a thing as “too much study,” when it’s clearly a transparent attempt to delay the protections that hard-working retirees want and need.