I had an epiphany today, as I was reading Mark Schoeff’s July 21 article on InvestmentNews.com: “Congressman Explains Why He’s Trying to Stop Fiduciary Rule.” Schoeff’s story relates comments made by Rep. James Lankford (R-Oklahoma) during his current Senate campaign. Apparently, Mr. Lankford’s opposition to a fiduciary standard for brokers is an attempt to stop the SEC from: “…creating a regulatory scheme that discourages middle- and lower-income Americans from investing by foisting higher regulatory and liability costs on brokers and driving them out of the advice market for those with modest assets.”
Of course, there’s nothing new about the “cost” argument being part of the securities industry’s constant stream of “reasons” why brokers should not have to act in the best interests of their clients. Yet something about Lankford’s claims—maybe his phrasing, or his forthright approach—brought my opposition to an abrupt halt.
And I thought, dagnabbit (that’s what my grandmother from Iowa used to say), this guy’s onto something: what retail investor in their right mind would want a financial advisor to be required to put their interests first, when they could get “advice” for less from an advisor who’s free to put his/her own interests first, or represent the interests of their broker-dealer, bank or insurance company?
While the reason that requiring advisors to put clients’ interests first would raise costs still isn’t clear, I find that I’m no longer hampered by that little detail. In fact, now that I’ve found my Road to Damascus, it seems to me we’ve all been way too shortsighted in our approach to professionals in general. Mr. Lankford’s Congressional reasoning clearly raises the question: Why stop with financial advisors? If the duty to put people’s interests first costs us money, why not remove it from all professions?
What follows are but a few examples, off the top of my head, of the myriad benefits of chucking this whole fiduciary/client/patient best interest thing for other professions in addition to financial advisors. I’m sure that once you see the light, you’ll come up with more examples of your own.
Why not let drug companies pay doctors a percentage of the cost of the drugs they prescribe? Each doctor could “sign” with a specific drug company, and patients would have the “right” to choose their physician in part based on their drug company affiliation. Doctors’ fees would go way down—in fact, I’d predict that some doctors would treat their patients for free. What’s more, I see surgeons getting in on the action too: waiving their high fee-based compensation in return for a cut of the drug, surgical supply and hospital charges associated with their operations.
Why not let local, state and federal prosecutor offices pay defense attorneys a bounty on every client who gets convicted of a crime? Legal defense costs would down to next to nothing (again, with some lawyers representing their clients for free); conviction rates would soar, and more bad guys (along with everyone else) would go to jail. Cases would be settled much more quickly, reducing taxpayers’ trial costs.