I find it deplorable we need the Department of Labor (DOL) to tell insurance agents and financial advisors to do right by their clients. Even worse, insurance and brokerage companies are spending millions on lobbyists to challenge and water down the Fiduciary Rule. The Center For Responsive Politics cites big insurance and brokerage firms have spent ~$124 million on lobbyists through August 2016. With an estimated $3 trillion in investable assets and $19 billion in annual revenue at stake, the investment is a drop in the bucket.
In the public forum, the opponents to the fiduciary standard reference retail investors will not have access to quality advice. In my opinion, they really mean advisors will not have retail clients to fleece and peddle garbage to. Insurance agents slinging annuities stand to lose fat commissions. Brokers selling actively managed mutual fund accounts stand to lose large payouts and trailers. This is not about the retail investor being left in the cold. As a matter of fact, there are plenty of wealth management firms, both traditional and online, that serve clients well under the fiduciary umbrella. This is about an industry that has fleeced investors for so long and wishes to keep the profit stream flowing.
Investors can do their part by understanding how their advisor is compensated. I’m a firm believer that humans respond to incentives. If your financial advisor is incentivized to sell, which the many are, that will drive their behavior. An advisor’s objective of trying to meet annual sales or assets under management goal is likely to directly oppose the client’s need to prudently grow long term wealth.
I believe ethics, full transparency around fees, and accountability should be the foundation for any successful client and advisor relationship.