The Financial Industry’s Greatest Conflict-of-Interest: Lobbying Against Their Own Customers


With the Department of Labor (DOLs) long-delayed, new fiduciary standard is now becoming more accepted, the financial services industry still has not confronted its biggest conflict-of-interest: using client’s money to fund lobbying campaigns designed to victimize their own customers.

Like animals that eat their young, the financial services industry lobbying machine takes unsuspecting client’s money, uses a variety of fees and commissions to convert that into revenues that are then diverted to lobbying firms that campaign against legislation and regulations at the state and federal levels that would benefit investors.

Not only does this work against the best interest of investors, but it is an undisclosed, multi-million diversion of client assets that work to diminish their net returns by raising their portfolio expenses.

In this way, the clients of the world’s largest money managers and insurance companies are victimized in multiple ways that all act to reduce their political abilities to protect their own financial interests, while also costing them money.

And to add insult to injury, these anti-customer lobbying activities are not disclosed to investors in these huge fund and insurance companies by their financial representatives or by executive management. It’s all a secret, except when the lobbying firms, all of them sponsored by the financial services industry, make their regular reports with federal agencies, such as the Federal Election Commission (FEC).

lobbying graph

The Enemies of Individual Investors

So who are these public enemies that lobby against the interests of individual investors?  Here are some of them:

  • 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
  • The Coalition to Protect Retirement Security and Choice
  • Securities Industry and Financial Markets Association
  • National Association of Insurance and Financial Advisors,
  • The Financial Services Roundtable
  • Financial Services Institute
  • American Council of Life Insurers

 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 salespeople.

Paul Ryan: Anti-investor
Paul Ryan: Anti-investor

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 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.”

Predictably, the Republican leadership, under the direction of House Speaker Paul Ryan, has come out against the DOL fiduciary proposal under the falsehood that giving honest advice would somehow disenfranchise investors with small portfolios.

The reality is that investors with small portfolios pay higher fees than investors with large portfolios, so they are a more profitable segment of the financial services customer base. And since many small investors are less informed, they can also be more easily manipulated into buying more expensive, inappropriate products.

In short, opposing the DOL’s fiduciary standard in any form is aimed at maintaining financial services industry profits.  Just as the industry ignores the current retirement crisis, it pushes to maintain its outdated sales model at the expense of less informed investors and 401(k) providers.  Yet for the lobbyists and the political liaison executive at the corporate headquarters of major financial and insurance firms, it’s just another day at the office.

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


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