The protestors are who you would expect also. Largely the brokerage and insurance firms. Like the golf cart owners, they start by saying they support a fiduciary standard, just not this one. They are not out to harm anyone and no one is harmed by how it is anyway. In fact, they say, if the proposed DOL rule goes into effect, it will be bad for most people. Too much traffic on quieter roads.
Rubbish.
It won’t even be bad for the financial services firms. They will just have to adjust their processes. Heck, most of these companies already run programs subject to fiduciary duties stemming from the Investment Advisers Act.
Like the golf cart owners who wanted to keep their shortcut, they are perfectly capable of making the changes needed. They just don’t want to change their behavior.
Like the increased traffic arguers, opponents of the DOL rule are putting out some interesting stuff that can sound like it has some merit until one looks at it more closely. There are plenty of analyses out there to read if you are interested in a detailed dissection of the arguments. But a couple of other things stand out to me.
Remember the guy who was telling his neighbors that banning carts was really an effort to ban that section of the community from owning their own carts? Well, there are similar pieces of misinformation coming out with increasing frequency in the DOL matter.
The issue has become politicized, and with an election coming up, it may get even worse.
One of our clients received a breathless e-mail alert from a group that is not a fan of President Obama. It called the DOL proposal, “regulations that will pave the way for the federal government to seize effective control of your 401(k), IRA and any other non-union retirement plan that you hold independently or was provided to you through your employer.” It went on to call the proposal “Obamacare for your retirement plan.”
And so it is with politics -- characterize the issue in whatever way suits your agenda.
Partisanship isn’t necessary to play this game.
An e-mail from an unnamed insurance company to its agents was making the rounds on a couple of message boards. In it was this line: “If the regulation is implemented as written, clients must pay a fee prior to meeting with an agent or retirement specialist, regardless if a product purchase is made.”
The DOL proposal has no such requirement. Was the insurance company lying or just mistaken? I don’t know.
The e-mail goes on to urge the company’s agents to write to Congress. NAIFA’s pre-written letter ends with this declaration: “Please know that I already put the interests of my clients, your constituents, first. My clients -- many of whom I have worked with for over a dozen years -- know that I serve their best interests. Otherwise, they would no longer be my clients.”
That sounds a lot like, “We are careful drivers of our golf carts, and if we weren’t there would already have been a crash.”
I also became aware of the commercials the Secure Family Coalition has put together about the DOL rule. This coalition is a joint effort of several insurance-related organizations. The ads express dismay from hardworking citizens that regulations from Washington will make it harder to get advice and information about their 401(k) and IRAs and that they would no longer be able to work with their person without paying a lot more.
That sure sounds awful, and as long as the public doesn’t actually look into the matter, they may fall for it.
The protesting golf cart owners had their positions undermined by an important group -- golf cart owners that used the shortcut but knew it was dangerous and had long ago stopped taking the shortcut. Their behavior change had not caused them any suffering for taking the longer route. They knew that all would be safer and were willing to adapt, despite the inconvenience, even before it was required.
Ray Ferrara has been giving his time and considerable talents to the financial planning profession for decades, most recently as chair of the CFP Board. His testimony at a DOL hearing in August on behalf of the Financial Planning Coalition was masterful. The most important element of it being that if his fee and commission firm can handle the responsibility, anyone else that wants to can handle it as well. He stopped driving his cart on that road a long time ago.
As he put it in his remarks, “The argument that this rule will diminish the availability of services to middle-class Americans is simply not credible. ProVise has successfully served middle-class clients under a fiduciary standard for years. The re-proposed rule still allows us, and everyone else, to provide advice using a commission or fee model.”
Ferrara is not alone. There are many financial planners across the country in every sort of firm who conduct themselves as fiduciaries, whether doing so is required by law or not. They know adapting their processes to put clients’ interests first and eliminate conflicts of interest is the best way to serve their clients and therefore great for their business.
Ferrara is leading the way, as usual, by example. Will enough registered representatives, IARs and insurance agents follow? Will they speak up and get through to their firms -- and the organizations lobbying for their firms -- that they are not afraid of fiduciary responsibility? We’ll see. It could make all the difference.
Dan Moisand, CFP has been featured as one of America’s top independent financial advisors by Financial Planning, Financial Advisor, Investment Advisor, Investment News, Journal of Financial Planning, Accounting Today, Research, Wealth Manager and Worth magazines. He practices in Melbourne, Fla. You can reach him at [email protected]