Be careful what you ask for, you just might get it.

Opponents of the U.S. Department of Labor’s fiduciary rule thought they had put the issue to rest after a New Orleans circuit court vacated the rule. What they failed to anticipate was that fiduciary advocates would pursue the concept of fiduciary regulation state by state in the same fashion advocates of marijuana legalization have.

America’s constitution grants the states wide latitude to enact regulations. Florida, for example, has gone to great lengths to impose severe penalties upon fraud against seniors, given that its huge concentration of retirees makes it a magnet for scamsters.

Flipping the radio dial last night, I heard New Jersey Gov. Phil Murphy vow to avoid all the mistakes other states have made when they legalized pot. Apparently, marijuana brownies and gummy bears sold in some states are appealing to many folks under the age of 21. Who would have thunk it?

Ironically, New Jersey was all set to legalize marijuana in march, but at the 11th hour, the proposal fell apart because the state legislature couldn't finalize the details. Sound familiar.

When it comes to fiduciary regulation, the states are dealing with another subset of the population—people over 50 and their life savings—so the stakes are high. Some brokerage firms could threaten to play hardball with certain states.

There are reports that at least one big wirehouse is threatening to leave Nevada if the state enacts a strict fiduciary standard. Nevada is a young, fast-growing state attracting a growing number of retirees, but it’s not California or Florida. It is very hard to imagine any brokerage firm threatening to leave one of those states.

At the advisor level, it’s a different story. If small states enact very disparate, poorly defined fiduciary rules, it’s easy to see why a small firm, even an RIA that is a fiduciary with a handful of clients in a state, might decide operating in that state isn’t worth the trouble. Others could find that conflicts with federal laws were difficult to reconcile.

Turning this into a fee-versus-commission argument obscures some issues. Fees are winning in the marketplace, but for certain strategies like laddered bond portfolios, charging cheap, onetime commissions makes sense. Levying ongoing fees for this is a bit like charging fees to watch paint dry. But things are changing fast, and ETF providers now offer cost-effective products for this strategy.

The guess here is that when the next recession and bear market arrive, opponents of fiduciary regulation will find themselves on their heels. Until then, it’s likely to be a classic spectacle of conflicts between state and federal regulation—just like marijuana.

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