Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Interesting concept - Fiduciary Standard for Brokers
Old 02-23-2015, 08:24 AM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
harley's Avatar
 
Join Date: May 2008
Location: Following the nice weather
Posts: 6,418
Interesting concept - Fiduciary Standard for Brokers

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 -
Quote:
"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.
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.
__________________

__________________
"Good judgment comes from experience. Experience comes from bad judgement." - Will Rogers, or maybe Sam Clemens
DW and I - FIREd at 50 (7/06), living off assets
harley is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-23-2015, 08:27 AM   #2
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,068
So you think government can pass laws requiring leopards to change their spots?
__________________

__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 02-23-2015, 08:38 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
harley's Avatar
 
Join Date: May 2008
Location: Following the nice weather
Posts: 6,418
Quote:
Originally Posted by REWahoo View Post
So you think government can pass laws requiring leopards to change their spots?
No, I'm sure this will never happen, or if it does there will be loopholes big enough to drive a Brinks armored truck through. But that's my assumption on any government action. I just think it's interesting that they are even paying enough attention to it to even do any political grandstanding with it. I'm actually more interested in whether there is any legitimate reason not to do it, other than self interest in the financial industry. Would it truly stop potential retirees from being able to take part in certain investment classes? Or would it just stop the brokers from offering them because they wouldn't be raking in the fees any more?

As anti-government involvement as I am in most areas, I can't see this change coming from anywhere other than regulation. It's a shame, because I do think that fiduciary standards should be required of people who advise investments.
__________________
"Good judgment comes from experience. Experience comes from bad judgement." - Will Rogers, or maybe Sam Clemens
DW and I - FIREd at 50 (7/06), living off assets
harley is offline   Reply With Quote
Old 02-23-2015, 08:42 AM   #4
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,406
Here's a link to the DOL FAQ on the proposed change http://www.dol.gov/featured/ProtectYourSavings/faqs.htm
__________________
MichaelB is offline   Reply With Quote
Old 02-23-2015, 09:07 AM   #5
Full time employment: Posting here.
Accidental Retiree's Avatar
 
Join Date: Feb 2012
Posts: 975
Quote:
Originally Posted by REWahoo View Post
So you think government can pass laws requiring leopards to change their spots?
__________________
Chief Retirement Strategist
The AR Group
Accidental Retiree is offline   Reply With Quote
Old 02-23-2015, 09:16 AM   #6
Thinks s/he gets paid by the post
target2019's Avatar
 
Join Date: Dec 2008
Posts: 3,705
After reading the DOL FAQ, I believe the DOL is saying that the rules are aimed at surfacing all of the compensation that an advisor receives based on his/her recommendations to the client.
__________________
target2019 is offline   Reply With Quote
Old 02-23-2015, 09:25 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 7,369
My favorite "justification" from the brokers in protesting this is there may be less investment options available for people. It truly would be the end of the world if 5% load funds became extinct and more low cost index funds were then forced down investors throats!


Sent from my iPad using Tapatalk
__________________
Mulligan is offline   Reply With Quote
Old 02-23-2015, 09:31 AM   #8
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Quote:
Originally Posted by Mulligan View Post
My favorite "justification" from the brokers in protesting this is there may be less investment options available for people. It truly would be the end of the world if 5% load funds became extinct and more low cost index funds were then forced down investors throats!
Think of the negative impact to the luxury housing and automobile market when the brokers are forced to not sell products that pay them the highest commissions.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Old 02-23-2015, 11:09 AM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
 
Join Date: Mar 2007
Posts: 9,871
Outrageous government over reach. I'm still mad that the government now makes employers reveal 401(k) fees to employees.
__________________
Yes, I have achieved work / life balance.
travelover is offline   Reply With Quote
Old 02-23-2015, 11:30 AM   #10
Thinks s/he gets paid by the post
Sunset's Avatar
 
Join Date: Jul 2014
Location: Chicago
Posts: 4,707
Must have been some high up gov't official finally realized how he/she lost 5% on his millions in "campaign contributions" by investing it
__________________
Sunset is offline   Reply With Quote
Old 02-23-2015, 12:10 PM   #11
Full time employment: Posting here.
 
Join Date: Aug 2014
Posts: 555
Quote:
Originally Posted by travelover View Post
Outrageous government over reach. I'm still mad that the government now makes employers reveal 401(k) fees to employees.
I think Megacorp's response to this was to make the fees explicit by making it a line item charge on our 401K. At least it was a % of assets!
__________________
ArkTinkerer is offline   Reply With Quote
Old 02-23-2015, 12:21 PM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,251
I will have to read it to see what it might mean....

IOW, if I call up Vanguard or FIDO and talk to someone on the phone do they have a fiduciary responsibility to me


Back when I worked in a trust dept., a fiduciary level of responsibility was much higher than due care (or whatever it is called)....

I just hope that it does not increase fees on what I do....
__________________
Texas Proud is offline   Reply With Quote
Old 02-23-2015, 04:41 PM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,446
I think a lot of naive investors think that financial advisors already have a fiduciary duty towards them and really have a hard time believing otherwise.

Just like they believe a lawyer has a professional responsibility towards their client and a doctor has a professional responsibility towards their patient.
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is offline   Reply With Quote
Old 02-23-2015, 09:33 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,251
Quote:
Originally Posted by audreyh1 View Post
I think a lot of naive investors think that financial advisors already have a fiduciary duty towards them and really have a hard time believing otherwise.

Just like they believe a lawyer has a professional responsibility towards their client and a doctor has a professional responsibility towards their patient.

Do not know about lawyers.... but one of my sisters is a nurse and she does have professional responsibilities to her patients... so I would assume that the docs do also...
__________________
Texas Proud is offline   Reply With Quote
Old 02-23-2015, 10:24 PM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,446
Quote:
Originally Posted by Texas Proud View Post
Do not know about lawyers.... but one of my sisters is a nurse and she does have professional responsibilities to her patients... so I would assume that the docs do also...
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.
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is offline   Reply With Quote
Old 02-23-2015, 10:54 PM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2003
Location: Kansas City
Posts: 7,408
Quote:
Originally Posted by REWahoo View Post
So you think government can pass laws requiring leopards to change their spots?
I think the old Pres should invite John C Bogle(St. Jack) to come in from the wilderness and they can have a beer or at least a good laugh together.



heh heh heh - I think he even wrote some books and has an opinion on the meaning of 'fiduciary'.

By the by - I'm old enough to remember why paying up front sales loads(in addition to expense fees) to brokers for mutual funds were good for me.
__________________
unclemick is offline   Reply With Quote
Old 02-23-2015, 11:09 PM   #17
Full time employment: Posting here.
 
Join Date: Oct 2006
Posts: 898
Quote:
Originally Posted by harley View Post
As anti-government involvement as I am in most areas, I can't see this change coming from anywhere other than regulation. It's a shame, because I do think that fiduciary standards should be required of people who advise investments.
Actually, I think it is already the law that investment advisers subject to the Investment Advisers Act of 1940, by SEC regulation, must comply with fiduciary standards when advising clients about investments. Financial advisors, also known as brokers, account executives, or registered representatives, who handle retail brokerage accounts can also be subject to fiduciary standards for "discretionary accounts," namely, accounts where the client/customers has essentially turned over total management of the investment portfolio to the financial advisor.

Most of us don't have such discretionary accounts with our retail brokers, but have "non-discretionary accounts," where the financial advisor handles your account and makes recommendations to the client to buy or sell securities, with the client ultimately approving the transactions. 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.

Notwithstanding the President's initiative, a lot of this is already covered under existing laws and regulations, but it is quite a murky area and the President's approach might promote create greater clarity especially for retirement accounts.
__________________
Someday this war's gonna end . . .
ChrisC is offline   Reply With Quote
Old 02-24-2015, 08:15 AM   #18
Thinks s/he gets paid by the post
photoguy's Avatar
 
Join Date: Jun 2010
Posts: 2,301
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.
__________________
photoguy is offline   Reply With Quote
Old 02-24-2015, 09:13 AM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
 
Join Date: Mar 2007
Posts: 9,871
Quote:
Originally Posted by photoguy View Post
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.
Interesting. I didn't read every word, but the tone is of one in serious denial.
__________________
Yes, I have achieved work / life balance.
travelover is offline   Reply With Quote
Old 02-24-2015, 10:04 AM   #20
Thinks s/he gets paid by the post
target2019's Avatar
 
Join Date: Dec 2008
Posts: 3,705
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.
__________________

__________________
target2019 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Boards Fiduciary Responsibility MRG Stock Picking and Market Strategy 3 01-28-2015 10:17 AM
How Do I Find a Hourly Fiduciary CFP? Cheesehead FIRE and Money 17 03-20-2014 11:57 AM
Black Caucus Members Balk at DOL Fiduciary Rule mickeyd FIRE and Money 13 04-03-2013 01:22 PM
Fiduciary responsibility of beneficiary db FIRE and Money 5 05-02-2004 01:05 PM

 

 
All times are GMT -6. The time now is 03:51 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.