Regulation Best Interest is “a disaster for investors” because it “creates fake fiduciaries,” argues Jane Bryant Quinn, the veteran personal finance journalist and advocate for consumer rights.
In a recent interview with ThinkAdvisor, she offered candid opinions on the Securities and Exchange Commission’s Reg BI, zero commissions, the Secure Act, certain annuities and financial advisors.
The bestselling author has just released a revised, updated edition of her 2016 “…treasure chest of…financial advice…” as Forbes calls it. “How to Make Your Money Last: The Indispensable Retirement Guide” (Simon and Schuster- Jan. 7) covers recent changes in tax laws, health insurance, Social Security and much more.
Ever a tough critic of brokers, Bryant Quinn doesn’t hold back in the updated guide. Brokers “call themselves wealth managers, financial consultants, investment planners, etc. — hiding the fact that they’re salespeople,” she writes.
Later in the chapter — which includes a section labeled “The New Fiduciary Muddle” — she goes even further: “It’s safest to assume that anyone working at a brokerage firm or insurance company isn’t a true fiduciary.”
In the interview, however, she praises the financial services industry for having introduced products such as IRAs and 401(k) plans, which, she notes, have made retirement planning easier.
Last year, Bryant Quinn herself retired and relocated, with husband Carll Tucker, retired founder of DailyVoice.com, to Rome for a year.
In our conversation, she reveals answers she sought from finance professionals before making the big decision to exit the labor force.
After beginning in 1963 as a reporter, she later conducted a column in Newsweek for 30 years and wrote for The Washington Post, Bloomberg News and the AARP Bulletin, among other publications. An Emmy winner, she hosted her own PBS program and was a regular correspondent on CBS-TV.
Here are highlights from our interview with the long-trusted journalist, 80, who phoned from her apartment perched on the highest hill in Rome:
THINKADVISOR: What do you think of the SEC’s Regulation Best Interest?
JANE BRYANT QUINN: It creates fake fiduciaries. It’s a disaster for investors because now a salesperson can basically say, “I have your best interest at heart — I put your interest ahead of mine.” They’re allowed to use exactly the same language that fiduciaries use but without actually being fiduciaries.
Any other downside that you see?
If [FAs] have disclosed conflicts of interest in the contract, the assumption is that if you’ve read the disclosures and buy the [product] anyway, you think it’s in your best interest — which of course is nuts. It’s just wrong. Also, the salesperson could be a [real] fiduciary with one transaction and not a fiduciary with another. How does [the average person] understand things like that! It’s insane!
Fixed indexed annuities may be getting hot again. I know you don’t approve of them. Your thoughts?
They’re getting hot because of the BI regulation. They fell off sharply when [FAs] thought they would have to be fiduciaries when dealing with retirement accounts. But as soon as it turned out you don’t have to be a fiduciary — that you can be a “ha-ha” best-interest fiduciary — sales went up again.
Why do you dislike fixed indexed annuities?
People don’t realize that they’re priced to compete with bonds. But they have this apparent link to stocks — that you have an equity investment of some sort. So with a fixed indexed annuity, you’re basically buying a bond and paying a high annual price for it.
Anything else that you think is a big negative?
They’re supposed to be annuitized. People are told: You’ll be paid 5% for the rest of your life. But of course you aren’t earning 5% on your money. They’re parceling out 5% of your own money to you.
You do like immediate-pay annuities, however. Please explain.
I make a case for people buying them when they’re living longer than they expected. They give you a better lifestyle. They’re low-cost, simple, and you’re not dreaming that your payments will go up because stocks go up.
What’s your broad view of annuities?
If people who are afraid of stocks don’t want to be invested, annuities are a good idea. For people who don’t want to pay attention to investing whatsoever, they’re a good idea; [that is] a plain single-life annuity. It’s like having a pension. People shouldn’t get involved with those fancy lifetime benefit annuities that cost them more than they realize and whose benefits they may not actually want in the end.