With Friends Like These, Who Needs Enemies: Here Are the Public Enemies of Individual Investors


Being an individual investor today is tough.

Not only do you have to suffer through increased market volatility, a low-return environment, worrying about job security and whether you will get a raise, but now there is another new source of concern: your financial services industry trade association.

Lobbyists: tied for being the world's second oldest profession
Lobbyists: tied for being the world’s second oldest profession

While the vast majority of investors do not even know their names or what they do, there is a multi-million industry comprised of financial services trade associations whose main goal is to work against the interests of U.S. investors. These associations function in the traditional role of lobbyists–they promote the goals of the corporation, industry or whoever is paying them—but in the case of individual investors, these firms are primarily focused on preserving the status quo.

In the financial services industry, this means they favor the large against the small, the informed against the uninformed, the strong against the weak. And for individual investors, you can see that your choices here are pretty limited because none of these lobbying organizations have no desire to advance your best interests. So who are these public enemies?  Here they are:

  • Securities Industry and Financial Markets Association (SIFMA)
  • The American Bankers Association (ABA)
  • American Council of Life Insurers (ACLI)
  • American Retirement Association for Advanced Life Underwriting (AALU)
  • Bond Dealers of America (BDA)
  • Financial Services Institute (FSI)
  • Financial Services Roundtable (FSR)
  • Investment Company Institute (ICI)
  • Investment Program Association (IPA)
  • Insured Retirement Institute (IRI)
  • National Association for Fixed Income Annuities (NAFA)
  • National Association of Insurance and Financial Advisors (NAIFA)
  • The National Association of Real Estate Investment Trusts (NAREIT)
  • The Real Estate Roundtable
  • The U.S. Chamber of Commerce

You may not know these names, but rest assured, they know yours and they are working hard to separate you from more of your own money.

Investors Digging Their Own Graves

In the case of many of these lobbyists, their funding comes directly from individual investors. This is a tragic irony because due to some Rube Goldberg-type of financial twists, individual investors give their money to investment firms to invest, but when they purchase a mutual fund, the most common type of investment to fund a retirement account, investors pay up to 19 separate types of fees, according to the U.S. Department of Labor.

A great example of this is the Investment Company Institute (ICI), which has a great database of information about the mutual fund and ETF industries, but in its schizophrenic existence, the ICI also tries to position itself as a “friend” of the individual investor.

3 Monkeys realNot so. The ICI’s multi-million budget, like many other financial industry lobbyists, and their highly-paid staff are all paid from the fees and expenses paid by individual investors to their investment firm, which in a perverted twist, then become contributions to the lobbying firms.  With these lobbying budgets, these firms start to advance financial and investment regulations and policies at the state and federal levels that work against the very people who are paying their bills in the first place: unsuspecting individual investors. At this point, it’s opportune to mention what types of people work as lobbyists.  In the case of the financial services industry, these lobbyists can seem like normal people who attend church, little league games, PTA meetings and ride the subways with their fellow citizens.

But when they are at the office, however, they actively and consciously develop policies designed to make the financial security of their fellow citizens less secure, separate them from their money, or give them even less recourse than they have now to seek damages from errant banks and financial firms. Lobbyists pave the way for white collar criminals, but in the Beltway Culture, they are highly regarded because they are well compensated to manipulate the system from the inside.  Individual investors, meanwhile, just become collateral damage for the lobbyists’ activities, even though they are the ones who pay lobbyist salaries.

Twisting the Truth

The latest episode of financial industry lobbyists working against individual investors come in the firm of the decade-long debate about implementing the fiduciary standard for financial sales people. This simple change—disclosing a salesperson’s conflicts-of-interest during the process of selling investment products to less sophisticated investors—is anathema to the financial industry.  That’s because the industry loves to deal with the naïve and uninformed.  It makes the sales process faster and more profitable.  No need to explain alternative investment products or review fees and expenses, or even if the product is being sold by the same firm the investment re works for when a cheaper and better product is readily available. In the latest episode of the fiduciary standard sage, the lobbying group SIFMA is on record as saying that giving suckers and even break is bad for America.

In an earlier comment letter,  Tim Ryan, president and CEO of SIFMA said that by enacting the fiduciary standard “the Labor Department is looking to erase 35 years of established regulatory rulemaking and legal certainty which would also impact the ability of millions of Americans to save for retirement, impost

Tim Ryan of SIFMA
Tim Ryan of SIFMA

additional costs on plans and IRAs or limit access to markets, products and service providers.”  SIFMA stopped short of saying the fiduciary standard would cause ocean tides to reverse and prevent cows from producing milk, but you get the idea. This is from the tried-and-true Chicken Little playbook; the same one used against the argument for global warming and carbon taxes.

SIFMA and the other lobbying firms listed earlier also twisted some survey results to buttress their pre-established position against proposed DOL regulations that require brokers and insurance agents to act as fiduciaries (as registered investment advisers already do).  The anti-fiduciary forces said the regulations would be “prohibitively expensive,” and “will make it impossible to offer quality services to low- and middle-income customers.” That is not true. Instead, financial service industry reps have indicated they favor the fiduciary standard according to findings of the 2015 fi360 Fiduciary Standard Survey.  Here is what was found:

“The survey’s results flatly refute the implication that it costs more to work with an adviser who puts the investor first, or that smaller investors would be shut out of the market for fiduciary advice. Does it cost investors more to work with a fiduciary? No, according to financial intermediaries working with client investors every day. In fact, survey participants say the opposite is true – that operating under the higher standard saves clients’ money. They say the fiduciary standard does not cost investors more, or reduce product or service choice, or price some investors out of the market for investment advice compared to a broker operating under the less stringent suitability standard.”

This survey comes after the SEC staff in 2011 recommended that the fiduciary standard be extended to brokers. In 2014 the SEC’s Investor Advisory Committee said it believed “that personalized investment advice to retail customers should be governed by a fiduciary duty, regardless of whether that advice is provided by an investment adviser or a broker-dealer.”

Sick of the Status Quo?  Here’s the Alternative…

If you are a financial professional and want to push against the lobbyists and their alternative view of reality, here is your chance.The Committee for the Fiduciary Standard , a great organization,  has an online petition you can sign and send to the appropriate regulators.  Here is a link to the survey.  Lobbyists are civilization’s second oldest profession; they will do anything for money.

So if this petition re-directs their funding, they will die on the vine, albeit in some very expensive silk suits.Here is the link to sign the petition.   Signing it only takes a minute and it could re-shape the entire financial services industry for the better. That’s a change that is long overdue.

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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, www.mutualfundreform.com, was named best small blog in 2009 by the Society of American Business Editors and Writers (SABEW).


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