The Stakes
This is no place to be kind. Our legitimacy is at stake. We have played kindness games with our imitators for way too long. We have endured industry’s failure to abide by the sentiments of the FPA v. SEC ruling on broker-dealer exemptions. We have tolerated gimmicks of various sorts by people using the word “fiduciary.” We have not fought back when both salesmen and industry periodicals have muddied the meaning of the words “advisor” and “financial planner.” We ought not to play games with the Department of Labor standards. This is not the time.
In that vein, I suggest we are witnessing the most important reckoning the financial planning profession has ever faced. Both the internal and external realities of what is taking place will determine the future of the profession for all time, at least within the United States. The idea is to try to keep good guys from getting lost in the crowds of wannabes claiming to be planners. The pretenders are hardly great respecters of the six-step process, yet they deceive and parade as if they were. In consequence, they confuse the woebegone with fancy suits and offices, befuddling vocabularies and using credential letters signifying who knows what.
In contrast, authentic financial planners need to line up behind the Department of Labor. The new rules will not make every kind of behavior accountable, but it is a singular opportunity for us to get some things right—like accepting loyalty to client needs as a bedrock principle. More clarification about the nature of planning and its delivery will come later.
End The Confusion
Why is it good that this is happening now? Because it will end the confusion (illustrated by John Oliver’s complaint). In a way, the Department of Labor did us a huge favor in this regard: It created a public line of scrimmage for authentic fiduciaries to do battle with the status quo. Think of other disrupted industries (like those that made buggy whips). Narrow-visioned defenders of the old guard have every reason to hang on for as long as they can. Inevitably, time will have its way with them.
It’s also a good time because of the challenges facing an aging and under-saved nation. Neither the country nor its individual citizens have long-term savings to waste on antiquated, underproductive or obsolete retirement systems. People are living longer, which means the rules for investing are changing and the status quo will have to change too. Many folks are going to be zigzagging between their insufficient funds and various systems of public support, so the public has a vested interest in seeing that retirement savings and investments are maximized and reliable.
The Department of Labor, which focuses especially on retirement and retirement accounts, has a role to play here because this is not an arena in which the words “buyer beware” are particularly effective. We are not talking sophisticated end users. Financial issues are not intuitive. Unsophisticated consumers can be drowned in financial jargon and are generally unequipped to understand much of what is being presented, whether it’s by a fiduciary or non-fiduciary.
It’s tough to make a living selling term insurance and plain vanilla investments to people of modest means. Maybe that should tell us something.
It raises questions for the financial planning profession: Namely, what is it that financial planners really do and whom do we serve? Are we wealth managers? Advisors? Salesmen? Are we a profession? Do we just mainly serve the top 10% of net worth? Or do we need to broaden our horizons? Can any vocation claim the stature of an authentic profession serving only 10% of the population? Or do we need to find ways to work on behalf of the bottom 90% … … starting with their retirement accounts?