“Tell me where a man gets his corn pone and I’ll tell you his opinions.” Mark Twain
The political tug of war between the Department of Labor (DOL) and the financial industry is over five years old. The DOL Fiduciary Rule, also known as the “conflict of interest” rule was slated to become law in April. Its fate is now in limbo with the new administration. As expected, it was much watered down from the initial rule to avoid an all-out political Civil War. Still, political rancor dominates the press, with statements like Senator Ryan’s: “The DOL Fiduciary Rule is Obamacare for the financial industry.”
Drama, Obama, and Facts About the DOL Fiduciary Rule
Can the headline seeking, rhetorical drama. Whether Obamacare is a good idea or not is irrelevant. Ryan’s claim is far out in right field. A foul ball. To be clear – it isn’t a democrat or republican agenda but it is very political. Ryan, like many of his colleagues on both sides of the aisle are either ignorant of the facts, or they favor the “corn pone” from lobbyists. Shocking! Moneyed interests come before their constituents. Hmm….can we wonder why 9% congressional approval ratings.
The financial industry and its political backers claim the new rule will increase compliance costs. Higher costs will force them to exit the the small retirement plan market. That is a partial truth that applies to those business models that rely on selling products that lack clear disclosure and accountability for their advice. These models should have to increase their costs to service clients. If they can’t compete under free, fair, and open competition they deserve to lose in the market.
The financial services industry structure is massively inefficient to the financial consumer, and has been able to extract excess profit at clients’ expense without fiduciary responsibility and liability. Perhaps a good business model, certainly not a good service model. Its time is overdue to be scrutinized. Would you rather be served by a model that conflicts with your goals and buries your true costs in fine print, or with accountability and transparency?
The Court of Informed Public Opinion
What right thinking person can argue against the DOL’s reasoning: putting client interests first with increased transparency and disclosure of how fees (aka your money) are paid. The dollar amounts lost to excessive and poorly or undisclosed fees are very large. You should you care about that, right?
To the Libertarian who says all government regulation is over reach let’s ask: can you have a football game without referees? Do you want the 350 lb. behemoths to own the field? So it is with the financial industry which has proven incapable of policing itself. Anybody remember 2008-09? Better to have an imperfect regulation than no rules in the game.
The DOL Fiduciary Rule simply attempts to help financial consumers understand the facts so they can make the best decisions for their financial future. The DOL Rule is focused on the retirement market, but the emphasis on transparency has import and future benefit to all financial consumers.
Jerry Matecun helps business owners to understand and manage retirement plan risks and responsibilities, as well as help participants understand saving, investment, and distribution strategies vital to retirement readiness. For a no cost, confidential conversation regarding your retirement plan call or email Jerry at 949-273-4200, 616-499-2000, or jerry@compoundvalue.com.
PLEASE NOTE: Nothing herein or elsewhere on this site constitutes investment, legal, or tax advice. For details please see Disclosure.
