About That DOL Fiduciary Survey ...

We need to ask the questions: why the spin, why the fear? As I said in my earlier article, the DOL has been seeking to create clarity on the fiduciary issue so there is no further dodging of the fiduciary role by those who have creatively skirted ERISA while continuing to deliver advice. The industry apparently does not want to declare themselves fiduciaries to do what they have been doing for years under the guise of “education.” Education, at the plan sponsor level, is a Trojan horse; it always has been. In an ERISA plan, serving other interests beyond those of participants and beneficiaries is prohibited and always has been. So the sudden industry “shock,” apparently only recently becoming aware of ERISA, is humorous (reminds me of Casablanca).  In my nearly 30 years in the industry, trainers have frequently implied that selling a product, any product, is worthy. Even when sold without regard to end-user costs, the assumption is that it’s disclosed in the prospectus, so it’s legal. Suitability should be pre-eminent and is masterfully effective, they say. Self-dealing is a simple fact of choosing share classes that charge more than is reasonable to pay advisors more than is reasonable, or worse, to bias “education” toward those options that pay more. “What the marketplace will bear” pricing models don’t work here.  Because, as a fiduciary, with an obligation to the participants and beneficiaries, self-dealing has no place, and suitability cannot root out self-dealing.

Knowing that a fiduciary is a steward, why is the industry dead set against stewardship?  My speculation is this: the vast majority of the industry that supervises the vast majority of industry salespeople wants them dedicated to that one function only — selling. Somehow, stewardship and sales have a hard time uniting. Sales is usually a systematic process of persuasion, and that can be a lot of fun.  Stewardship is a systematic process of prudence — no fun. Yet, I know these two can coexist. 

Stewardship requires one thing that sales does not: asking one question at the inception of every transaction — is this the right thing to do? That is all. Not a difficult question to ask, but one that is fraught with risk. Because if the answer is no and the transaction proceeds anyway, well, the obvious needs not be stated. 

I suspect corporate risk management is really what this is all about. Industry interests have misstated the truth with a survey, pretended that it represents the desires of business, and that at its heart is nothing more than spin.