The Prudent Fiduciary

Scott Pritchard | Principal

A look at the major issues that are shaping fiduciary best practices today.

Whose Interests Come First? - Part Two

May 2015

“All advice should be in the best interest of the consumer. Bad financial advice is just wrong – period.”

That was the quote from Jo Ann Jenkins, CEO of AARP, which I used to close my most recent post highlighting the Department of Labor’s (DOL’s) new fiduciary proposal.

You would think it would be hard to argue with Ms. Jenkins’ comment. Yet stock brokers and the insurance industry have come out voraciously against the DOL’s suggestion that anyone providing investment advice to 401(k) participants or IRA holders be legally required to put the interests of the investor ahead of the interests of the investment adviser.

The gist of the broker’s argument seems to be that it is in a client’s best interest that the broker NOT act in the client’s best interest.

And now they have at least one member of Congress on their side. Rep. Ann Wagner of Missouri (whose district just happens to include the home of Edward Jones, the brokerage firm with the most offices in the U.S.) recently had the following to say to brokers gathered at the Congressional Conference of the National Association of Insurance and Financial Advisors (NAIFA) regarding the DOL’s fiduciary proposal:

“We’re at war with the Department of Labor. I need you to be tough. If push comes to shove…by God, we’ll just defund them.”
                                                             - Investment News, May 20, 2015

She went on to express the concern that requiring brokers to put their clients’ interests ahead of their own would ultimately raise regulatory and liability costs for brokers to the point that brokers could no longer serve “the middle-income market of retirement savers”.

And so goes the broker’s argument:

If you force me to put your interests ahead of my own then I won’t make enough money to make you worth my while.

Pardon me if I don’t feel pity for Joe Broker.

If the DOL’s fiduciary proposal becomes law and brokers choose to stop working with 401(k) plans and IRA holders, there are thousands of capable Registered Investment Advisors (RIAs) around the country who will gladly step in to serve those clients and to put the clients’ interests first.

The final weeks of debate over the fiduciary proposal should be very interesting for those of us committed to helping 401(k) participants and IRA holders save for a secure retirement.


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