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DOL Seeks to End Victimization of Investors

In the never-ending debate about the retirement advisor industry’s adoption of the fiduciary standard–aka, giving a customer an even break–a Department of Labor (DOL) official has cut to the chase and said the fiduciary rule would effectively change the advisory business culture.

Can you change a culture?

Can you change a culture?

And that’s exactly why the industry hates the fiduciary standard and financial regulation.

In what should be considered a slow-motion car wreck, as far as individual investors are concerned, this decade-long discussion continues.

And who benefits from these long delays? Surprise, it’s the retirement advisory industry.

And they benefit to the tune of about $17 billion annually, and possibly up to twice that amount, according to a White House study. This $17 billion represents about 1% of all retirement savings.

So when you combine the push to adopt the fiduciary standard with a study showing investors pay $17 billion annually in fees based on incomplete advice, it’s no wonder the financial industry hates the current administration.

(No one has ever tallied to regulatory costs of holding a decade of hearings on the fiduciary standard, but that amount does not count since it is borne by taxpayers.)

In the latest fiduciary standard saga episode, based on hearing 25 hours of testimony in April 2015 on its draft rule from about 80 different experts, ranging from brokers, custodians, fee-only advisors, investor advocates, lawyers, lobbyists, the chairman of the DOL’s hearings on its proposed fiduciary rule, said advisers can keep their “conflicted” commissions, but it’s time to stop harming clients by depleting their retirement savings, according to a report in Financial Planning magazine.

In the article, the magazine said the DOL wants to change the commission-incented advisory business and replace it with a “best interest contract” which does not hurt investors financially,

Tim D. Hauser, DOL Deputy Assistant Secretary

Tim D. Hauser, DOL Deputy Assistant Secretary

according to Timothy Hauser, a DOL deputy assistant secretary.

But the DOL acknowledges that commissions are a necessary evil in the advisory business, so any adoption of the fiduciary rule would also allow brokers to be paid to steer clients to products that benefit brokers more than investors and still receive “conflicted” streams of income, such as commissions, the magazine reported.

According to Hauser, “I think our goal here is just, right now, we think that investors who are receiving conflicted advice are getting worse investment advice than they would by getting un-conflicted advice by a pretty significant margin.”

But changing cultures is difficult, some consider it almost impossible. The U.S invaded Iraq to introduce a culture of democracy and that did not get too far. The same may be true of Wall Street.

Just today, the SEC said two Citigroup affiliates will pay almost $180 million as part of a settlement against its Citigroup Global market and Citigroup Alternative Investment that they defrauded investors and “made false and misleading representations” about two hedge funds that later “crumbled and eventually collapsed during the financial crisis.”

It’s all just part of the culture.




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Chuck Epstein

Chuck Epstein

Chuck Epstein has managed marketing communications and public relations departments for major global financial institutions and participated in the launch of industry-changing financial products. He also has written by-lined articles for over 50 publications, five books and served as editor and publisher of nation’s first newsletter on the topic of using the PC for personal investing and trading. (“Investing Online, 1994-1999). He also is a marketing consultant, writer and speaker on topics related to investor protection and opportunities in the very dynamic cannabis industry.

He has held senior-level marketing, PR and communications positions at the New York Futures Exchange, Chicago Mercantile Exchange, Lind-Waldock, Zacks Investment Research, Russell Investments and Principal Financial.

He has won national awards from the Mutual Fund Education Alliance (MFEA) and his web site,, was named best small blog in 2009 by the Society of American Business Editors and Writers (SABEW).

1 Comment

  1. February 24, 2016 at 11:33 pm — Reply

    I am very glad that this site has been created. We need to ensure that mutual funds are not sold under false pretenses, and this has been very disruptive to the retirement and level of stress on the elderly.

    It is essential that the SRO self regulation system be abolished. Industry tribunals must henceforth put the common law of contract and the criminal code as their primary regulative tools. Only then will investment transactions be secure and trustworthy. When the system can be assumed to be acting in good faith, the ability of the economy to grow in a wealth-building manner will be restored.

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