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Old 02-24-2015, 10:06 AM   #21
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On the surface it seems like a no-brainer to make sure that a financial advisor is held to a fiduciary standard.

However, I was listening to NPR and surprised to see that the SEC has come out against the proposal. See speech by the SEC commissioner here: SEC.gov | Remarks at The SEC Speaks in 2015 (see section 2)

After the criticism of the SEC by Markopolos, I'm not inclined to view the SEC in a positive light. I would be curious to see any forum interpretation of the SEC comments.

I was surprised that the commissioner didn't bother to refute one of the primary motivations of the proposal ( “the current regulatory environment creates perverse incentives that ultimately cost savers billions of dollars a year.”) The DOL link provided by MichaelB claims that studies have found that conflicts of interest result in 1% lower returns annually -- this is huge.
Markopolos said it because the Department of Labor was entering onto the SEC's turf, and so its just another in the infinte series of turf wars. The piece says that the SEC is doing a good job so why Dept of Labor are you cutting in on my turf.
Today is better than the old days as you can find brokerages etc that don't dispense any advice directly i.e. no broker calls with hot stock tip etc.
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Old 02-24-2015, 10:46 AM   #22
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The SEC is a revolving door for financial industry types so it's no surprise that they would want to 'let us manage it, stay the course' instead of doing what's right here. I think the proposal is a no-brainer personally, but siding with the consumer against this industry usually means it won't get traction.
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Old 02-24-2015, 06:29 PM   #23
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There are five comissioners, and no more than three can come from one political party. Sounds like Gallagher is practicing for his next appointment somewhere.
I learned something new today -- I had no idea the SEC was structured in this manner and that the commissioners were highly linked to political parties.


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Markopolos said it because the Department of Labor was entering onto the SEC's turf, and so its just another in the infinte series of turf wars.
Yeah it does seem like a turf war and the announcement implies that the SEC is not doing a good job.
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Old 02-24-2015, 08:49 PM   #24
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Yes they do, and lawyers do too such as attorney-client privilege and I expect several other things.

And docs supposedly have taken the Hippocratic oath, although when your hear about some things some (some!) doctors push to CYA or worse, you wonder what that is worth.

But a financial advisor? No obligation to put the client's interest first anove they're own sales incentives.
Specifically Lawyers in addition are responsible for handling client funds they are holding correctly . It turns out that is true in most countries and one of the easiest ways to get disbarred is to take funds from client accounts.
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Old 02-24-2015, 08:51 PM   #25
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SEC.gov | Current SEC Commissioners

There are five comissioners, and no more than three can come from one political party. Sounds like Gallagher is practicing for his next appointment somewhere.
Actually that is true of most federal regulatory agencies one example where it is going on right now is the FCC and net neutrality, The republican commissioners don't like the proposal the dem chairman is proposing so it will be a 3 to 2 vote at the end.
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Old 02-24-2015, 09:18 PM   #26
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On the surface it seems like a no-brainer to make sure that a financial advisor is held to a fiduciary standard.
So, the government decides to require the financial advisers to clean up there act, and do a better job for the clients.

Great protest and gnashing of teeth from those folks.

Step 2: Let's save the ignorant public from themselves (their own worst enemy). How about we require oversight of IRAs and similar by credentialed financial folks?

It would probably suddenly be supprted and publicized as a great thing! (By the financial folks.)

Government motto: Anything worth doing well can probably be done wrong...
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Old 02-24-2015, 11:47 PM   #27
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....................Nonetheless, financial advisors are required under FINRA regulations (Rule 2111) to make recommendations to the client, and place the client, in investments that are "suitable" for the client, given the client's risk profile which is generally documented by a standard risk tolerance form that the broker has you sign before you open up an account and is periodically re-submitted by the client.

................
In other words, if "suitable" means an index fund (say S&P 500) it's just as suitable to put the client in a fund with an MER of 3% and a trailer of 1.5% as using VTI.

The same thing is happening up here, north of 49. The MERs here can exceed 3%. The industry is crying about how "suitable" should suit the clients (they call it "the client's best interest"). After all, they can't just steal it.
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Old 02-25-2015, 01:18 AM   #28
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In England the fiduciary standard is the law.
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"This re-proposal could make it harder to save for retirement by cutting access to affordable advice and limiting options for savers," said Ken Bentsen, president of the Securities Industry and Financial Markets Association, which represents banks and assets managers.
Of course non-fiduciaries are going to cry bloody murder. It will slash their paychecks because they won't be able to sell the expensive crap that they always push on clients. There's a reason why people want to be brokers (rather than fiduciaries). It's because brokers and other non fiduciaries MAKE MORE MONEY off of people. I sure hope Obama can pass this thing. The "suitability standard" is a joke.
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Old 02-25-2015, 09:16 AM   #29
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I will say that when my father was suffering from early dementia, the fact he was seeking advice only from fiduciaries was a godsend.

This was all just pure luck, of course. It could have gone badly if he sought advice elsewhere.
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Old 02-25-2015, 12:10 PM   #30
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I saw this article in the Christian Science Monitor today - How Obama wants to help protect retirement investors - CSMonitor.com. It seems the President is proposing that brokers who advise clients on retirement investments follow a fiduciary standard of putting the client's financial well being ahead of their own. Revolutionary!

My favorite part is the response from industry - In my opinion this is something that should have been required all along, and I don't expect too much argument from the denizens of this forum. But since this is a political plan I'm sure there are catches there somewhere. It would be interesting to hear what the legitimate (non-greed driven) reasons there might be to oppose it.
My understanding is this legislation is not new
the "new" fiduciary standard has exceptions and conditions

the problem is those of us which ARE fiduciaries know the only way to do it is to be a fiduciary full time with no exceptions.

FINRA and many other pieces of old legislation will need to be overturned or re-written.

For example, could an IPO ever be in someone's "best" interest? Yet a broker needs to solicit business for it.

I see exceptions everywhere, the best solution is just find an advisor which does not report through FINRA.
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Old 02-25-2015, 03:19 PM   #31
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I will say that when my father was suffering from early dementia, the fact he was seeking advice only from fiduciaries was a godsend.

This was all just pure luck, of course. It could have gone badly if he sought advice elsewhere.
A friend of my late FIL got dementia and he was trading in his old car and buying a new car every month. I guess as long as the cars they sold him were "appropriate", the dealer was acting with integrity.
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Old 02-26-2015, 02:06 AM   #32
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A friend of my late FIL got dementia and he was trading in his old car and buying a new car every month. I guess as long as the cars they sold him were "appropriate", the dealer was acting with integrity.
85% of investment professionals in the US are not fiduciaries.

Three out of four U.S. investors mistakenly think that financial advisers at brokerage firms are required to put clients’ interests first.

The WORST are the small independent commission-based "advisers". They will sell you nothing but high commission crap.
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Old 02-26-2015, 10:51 AM   #33
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So, the government decides to require the financial advisers to clean up there act, and do a better job for the clients.

Great protest and gnashing of teeth from those folks.

Step 2: Let's save the ignorant public from themselves (their own worst enemy). How about we require oversight of IRAs and similar by credentialed financial folks?
In a perfect world we'd all be on the right side of the bell curve and/or have the bandwidth to understand complex financial matters, but we're not.

A 401k is a whole different animal than an IRA, both regulation and management-wise. And it is an almost universal replacement now for retirement savings, whereas the IRA is strictly optional and usually invested in by someone that knows what they're doing.
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Old 02-26-2015, 10:59 AM   #34
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Laws and regulations never stopped anyone from doing anything, but they are handy for punishing the perpetrators. These rules would be good for throwing the book at some of the more criminal elements in the FA ranks.
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Old 02-26-2015, 11:18 AM   #35
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While they're at it, they should pass a law to hold politicians to a fiduciary standard.


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Old 02-26-2015, 11:24 AM   #36
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Isn't fiduciary and financial adviser in the same sentence an oxymoron?
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Old 03-09-2016, 07:57 AM   #37
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Bumping an old thread:


I've been keeping an eye on this proposal to require fiduciary responsibility for FAs, and have been waiting to see how they screw it up. From this article, it sounds like the proposal may be overly broad regarding it's definition of compensation. How Fiduciary Rule May Censor Financial Broadcasters Like Dave Ramsey


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“Under the proposed regulation, investment advice from a radio host to a caller regarding the caller’s own investment issues would appear to be fiduciary advice if the advice addresses specific investments,” Mason said in an email. It doesn’t matter that Ramsey and other hosts aren’t compensated by listeners, he adds, as the DOL rule explicitly covers those who give investment advice and receive compensation “from any source.” Mason agrees with Markey that the compensation Ramsey receives from radio stations that carry his show and from book sales are enough to define Ramsey as a “fiduciary” under the rule.
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Old 03-09-2016, 08:12 AM   #38
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85% of investment professionals in the US are not fiduciaries.

Three out of four U.S. investors mistakenly think that financial advisers at brokerage firms are required to put clients’ interests first.

The WORST are the small independent commission-based "advisers". They will sell you nothing but high commission crap.
I heard the number is 98% are not full time fiduciaries.
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Old 03-14-2016, 11:04 PM   #39
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Saw that too. Stupid rule. John Q Public needs help and the rules intended at " protecting us ". are not gonna work.
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Old 03-14-2016, 11:40 PM   #40
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Harley, from what I've read, the broad based advice of the kind offered by radio programs and typical investment newsletters are not included in the proposed standards. That's why they have the disclaimer on radio shows and printed in newsletters.

This is something I support, because I've seen way too many times that the average stock jockey does not even attempt to go a breath beyond bare suitability to come even near the fiduciary standards that I and other CFPs must uphold by nature of our certification.

Dave's safe! His advice in books and on his show is very general, though I imagine the reason he's hollering about this is because his much advertised Endorsed Local Providers would be held to that standard, and not be able to sell quite so many insurance policies as "investments".
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