[The Final Dakar]

Specifically, the fiduciary duty rule. Here's an explanation about what I'm asking:

The Department of Labor’s definition of a fiduciary demands that advisors act in the best interests of their clients, and to put their clients' interests above their own. It leaves no room for advisors to conceal any potential conflict of interest, and states that all fees and commissions must be clearly disclosed in dollar form to clients. The definition has been expanded to include any professional making a recommendation or solicitation — and not simply giving ongoing advice. Previously, only advisors who were charging a fee for service (either hourly or as a percentage of account holdings) on retirement plans were considered fiduciaries.

Trump's team trying to make it sound bad:
https://www.bloomberg.com/view/artic...d-progressives

“We think it is a bad rule. It is a bad rule for consumers," said White House National Economic Council Director Gary Cohn in an interview with The Wall Street Journal on Thursday. “This is like putting only healthy food on the menu, because unhealthy food tastes good but you still shouldn’t eat it because you might die younger.”

I would define repealing this as anti-populist.

[reader50]

I'd only repeal the latest version extending the duty to unpaid advice. If you aren't being paid, you shouldn't have a duty to your non-client. Or suffer penalties for giving free advice.

[Paco500]

Originally Posted by reader50 

I'd only repeal the latest version extending the duty to unpaid advice. If you aren't being paid, you shouldn't have a duty to your non-client. Or suffer penalties for giving free advice.

Think about that. There is a cliche, 'if the service is free, you're the product, not the customer.'

It should not be legal to intentionally mislead an investor for your own enrichment just because you didn't charge a fee. We're not talking about uncles giving stock tips here, we're talking professional financial advisors. Ethical behaviour should be the rule even if no invoice is involved.

[Doc HM]

as long as you feel happy that the recent history of what happens when financial institutions become unregulated then I can't see a problem.
Apart from Sub-prime, PPI miss-selling, false accounting, rate fixing and general entire financial system collapsing I think the financial industry has demonstrated itself to be mature and self policing.

oh and the money laundering.

[subego]

The question isn't whether we want advisors to act in the best interests of their clients or not. The question is whether we want what the Department of Labor thinks is in the best interests of advisors' clients or not.

These are not the same thing, and the implication they are from the quoted description of the regulation is spectacularly self-serving.

I'll note if the people at the Department of Labor had some special insight, they wouldn't have time to do government work due to the strain of being filthy ****ing rich.

[Doc HM]

Originally Posted by subego 

The question isn't whether we want advisors to act in the best interests of their clients or not.

No it IS a question of whether or not we want advisers to act in the best interests of their clients or not.

When history repeatedly rams the fact down your throat that deregulating financial institutions is somewhat akin to driving an open truck full of fresh brains through a hoard of zombies with no fuel on board and a huge speaker system blaring out "fresh brains, help yourself" any legislation that seeks to overturn legislation really needs to be viewed from the understanding that the resultant brain gorging orgy is the intended end consequence.

[subego]

I'm not arguing against regulation, I'm arguing vague ideals cannot be regulated into existence.

[The Final Dakar]

Originally Posted by reader50 

I'd only repeal the latest version extending the duty to unpaid advice. If you aren't being paid, you shouldn't have a duty to your non-client. Or suffer penalties for giving free advice.

That's an interesting perspective. Anecdote time!

I was recommended a financial adviser to handle some money I came into. I had a meeting with the guy going through how I wanted to invest, risk tolerance, etc. and at the end I finally had to ask, 'So how does this work? Do you charge a fee for the meeting? Yearly? Commission?'

'Oh no,' he says. 'This is free.'

'How do you make money then?' I asked.

I'll be honest, I don't recall the answer well. I think it basically was the companies he worked with compensated him for business. Kickbacks, to me.

My point is, in this instance, you're arguing it's perfectly legal for him to rip me off because money hasn't exchanged hands. To me, it makes that fiduciary rule all the more important. It wasn't a one-off thing. He continues to have a relationship with me, reviews my portfolio, etc.

[The Final Dakar]

Originally Posted by subego 

I'll note if the people at the Department of Labor had some special insight, they wouldn't have time to do government work due to the strain of being filthy ****ing rich.

This confuses me. How does financial advisor looking out for his own self-interest correlate with making mad money?

To me the base assumption is pretty simple: They're discouraging advisors from doing something like when they have to funds to advise you to put money into, and one that has a proven track record but he makes no money, and the other one is far less proven, but he stands to make money commission on it, and he steers you towards the latter, he's not working in your best interest.

[subego]

Originally Posted by The Final Dakar 

This confuses me. How does financial advisor looking out for his own self-interest correlate with making mad money?

To me the base assumption is pretty simple: They're discouraging advisors from doing something like when they have to funds to advise you to put money into, and one that has a proven track record but he makes no money, and the other one is far less proven, but he stands to make money commission on it, and he steers you towards the latter, he's not working in your best interest.

To paraphrase a saying about the law, "morality is a rapier, regulations are a baseball bat".

The base assumption can be asserted with rapier-like precision. The real-world results of the regulations are somewhat messier.

In this case, the Department of Labor favors low risk index funds. The easiest way for a fiduciary to keep the Department from crawling up their ass is to recommend low risk index funds.

So that's what fiduciaries do. The bulk recommend low risk index funds. They're still acting in their own self interest, it's just that interest is avoiding the colon probe.

Maybe this is fine. There are plenty worse things to invest in than low risk index funds. However the regulations are not making fiduciaries act in the best interests of their clients, they're making them behave in what the Department of Labor thinks is in their best interests. They're not the same thing.

[reader50]

Originally Posted by The Final Dakar 

'Oh no,' he says. 'This is free.'

'How do you make money then?' I asked.

I'll be honest, I don't recall the answer well. I think it basically was the companies he worked with compensated him for business. Kickbacks, to me.

If he was an employee of the company you are a customer of (say, your investment bank), then he was paid. And indirectly by you.

If it was like you're thinking, paid a commission by funds to steer people that way, then those funds are his paying customer. And you're talking to a salesman. You should walk away.

The way the reg is presented above, it sounds like the duty applies to (anyone with?) professional duties, even if they give advice over the picket fence to a neighbor. Tell me it's far more limited.

This brought up two thoughts. First, it's like those bad employers that try to extend their control beyond their paid hours. Schools that try to control what students can do while at home. Employers that try to muzzle what employees can say while off the clock (no posting on forums for example). If employers want to control those hours, they should pay for them. At regular rates.

Second, imposing work duties and risks (of penalties) on professions when off duty means they're never off duty. A disincentive for volunteering. So professional advice gets locked up, and you'll only get it if you pay. So poor people cannot get professional advice, even in informal settings. Professional services definitely benefit people, so effectively limiting them to those who can afford them is just another class divide. Like doctors, law services, investment, and tax advisers. Upper classes benefit, and lower classes do without.

If the duty (risk of penalties really) does not apply when they aren't paid by/for you, you're more likely to see advice in informal settings. And assuming most people are basically decent, most of it will be good advice.

[The Final Dakar]

Originally Posted by subego 

To paraphrase a saying about the law, "morality is a rapier, regulations are a baseball bat".

The base assumption can be asserted with rapier-like precision. The real-world results of the regulations are somewhat messier.

In this case, the Department of Labor favors low risk index funds. The easiest way for a fiduciary to keep the Department from crawling up their ass is to recommend low risk index funds.

So that's what fiduciaries do. The bulk recommend low risk index funds. They're still acting in their own self interest, it's just that interest is avoiding the colon probe.

Maybe this is fine. There are plenty worse things to invest in than low risk index funds. However the regulations are not making fiduciaries act in the best interests of their clients, they're making them behave in what the Department of Labor thinks is in their best interests. They're not the same thing.

I think the general idea was not to have consumers constantly pushed into fund with high fees that don't provide much if any better returns because their advisor makes more money that way.

This was my issue with the entire concept, so when my financial advisor gave me options, I said I wanted to split the money up between his recommended company and one with no fees.

Right now the one with no fees is winning.

Originally Posted by reader50 

Second, imposing work duties and risks (of penalties) on professions when off duty means they're never off duty. A disincentive for volunteering. So professional advice gets locked up, and you'll only get it if you pay. So poor people cannot get professional advice, even in informal settings. Professional services definitely benefit people, so effectively limiting them to those who can afford them is just another class divide. Like doctors, law services, investment, and tax advisers. Upper classes benefit, and lower classes do without.

First off, I don't know how 'informal' advice is handled in other professions (like doctors or lawyers) but holding them to that standard seems fair enough. If not, carve out a simple exception for being on job (assuming that doesn't create massive loopholes).

To the second part, I'll gladly repeal the reg if that's found to be true. But first let's try it out, shall we? Plus, I'm skeptical the lower classes even have money to invest.

[subego]

Originally Posted by The Final Dakar 

I think the general idea was not to have consumers constantly pushed into fund with high fees that don't provide much if any better returns because their advisor makes more money that way.

This was my issue with the entire concept, so when my financial advisor gave me options, I said I wanted to split the money up between his recommended company and one with no fees.

Right now the one with no fees is winning.

This is just one good swing with the bat. I'm far more inclined to be on board with it than the working over needed for "client's best interest".

Maybe I'm missing something, but I don't see much good coming out of the "kickback" model of financial advice. Pushing the industry away from it has merit.