While I’ve never been able to fully embrace the Libertarian party platform, some of its positions do make sense to me. Case in point is their notion that government regulation often does more harm than good, since it creates an illusion of oversight and safety while many regulations are poorly enforced, when they are enforced at all. And while the new DOL rules seem to me to be a step forward, my many years of covering the regulation of the financial services industry has served to strengthen my general belief in this skepticism.
I sensed that I had found a kindred spirit in this regard as I read a comment posted by David F. Sterling on ProducersWeb.com to my July 28 blog for ThinkAdvisor, The SEC Investor Advocate’s View Askew: The Illusion of Fee Disclosure.
In that blog, I’d suggested that an SEC comparison of the ‘costs’ of commission and fee advice, without considering the relative client benefits of each business model, would only tell half the story. To make sure I’d interpreted Sterling’s comments correctly, I gave him a call in his office in Sarasota, Florida. The advisor and securities attorney’s knowledgeable and articulate elaboration on his comments made a very compelling case for more thoughtful approach to a fiduciary standard for advisors.
Here’s what he wrote, in part: “The time is long past due for those who promote and write about the ‘best interest standard’ to place their observations and conclusions in context. For example, that one can be held to a higher standard of care does not, ipso facto, ensure that the expertise and services rendered are commensurate with that standard.”
To me this sounded a lot like the securities industry’s mantra of “there are no guarantees of sound financial advice,” which in logical theory we call a ‘straw man’ argument. But that wasn’t Sterling’s point at all. Instead, he was suggesting that both the DOL fiduciary rule and the ’40 Act fiduciary standard set a bar that very few RIAs and financial planners can meet today.