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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75616  
Subject: HR-2374. Delays adviser fiduciary responsibiity Date: 11/4/2013 1:29 PM
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My newspaper reported today that last week the House voted to pass HR-2374 254-166, which would delay new rules requiring investor advisers to act a fiduciaries for their clients. In essence this would discourage advisers promoting investments that are most profitable to themselves rather than to the benefit of their clients.

Given the need for more of us to fund our own retirement with investments in IRA or 401ks, and all the stories of people who were misadvised or put into costly or underperforming investments, fiduciary responsibility sounds like a good idea.

My Congresswoman, Ann Wagner (who replaced Todd Akin) was one of the sponsors of the bill.

A search turned up this op-ed--

http://wagner.house.gov/media-center/in-the-news/stl-busines...

Needless to say, the financial community is strongly opposed to fiduciary requirements.

I am surprised that this law gets so little news attention.

Now it goes to the Senate.
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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73685 of 75616
Subject: Re: HR-2374. Delays adviser fiduciary responsib Date: 11/4/2013 1:55 PM
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http://en.wikipedia.org/wiki/Retail_Investor_Protection_Act_...

In essence this would discourage advisers promoting investments that are most profitable to themselves rather than to the benefit of their clients.

This would delay such rules until it is determined that such a change would not harm small investors. Not a terrible idea.

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Section 3 of the bill would amend the Securities Exchange Act of 1934 to prohibit the SEC from promulgating a rule establishing an investment advisor standard of conduct as the standard of conduct of brokers and dealers before it has ascertained: (1) if retail customers are systematically harmed or disadvantaged owing to the operation of brokers or dealers under different standards of conduct than those that apply to investment advisors under the Investment Advisers Act of 1940, and (2) whether adoption of a uniform fiduciary standard of care for brokers or dealers and investment advisors would adversely impact retail investor access or availability to personalized investment advice and recommendations.[1]

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73692 of 75616
Subject: Re: HR-2374. Delays adviser fiduciary responsib Date: 11/4/2013 5:02 PM
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Good idea hawkwin

Let's delay regulations that allow stockbrokers and insurance agents to pretend they are working in their clients best interest.

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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73694 of 75616
Subject: Re: HR-2374. Delays adviser fiduciary responsib Date: 11/4/2013 6:33 PM
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I know this is a bit controversial, but FWIW, this is my take.

I am an RIA and as such am held to a fiduciary standard, as the SEC defines it (there is more than one definition). The original Dodd-Frank law requires that a fiduciary standard be created for stock brokers and broker-dealers in their recommendations to account holders, but specifically to retirement accounts (retirement plans and IRAs). This delay is to allow more time to study the effect of such a fiduciary standard...although I'm not sure how much more time is required. (note: this does not apply to fixed insurance products, which are regulated by the states)

I frankly oppose a fiduciary standard to these groups. Yes, it sounds great and I'd just love to see stock brokers and other such securities salesmen held accountable for their 'advice'. Like insurance products, vacuum cleaners, used cars and some electonics stores....these people are commissioned salesman. Trying to hold such salesmen to some kind of fiduciary standard would be almost impossible to regulate and enforce and would prove confusing to consumers. I mean, to maintain a fiduciary standard for a salesman would require them to talk about risks and benefits of their products...which is fine...but then would also require speaking about alternatives and their risks and benefits. I mean, is someone who is paid on a commission going to recommend an alternative that would lose the sale? And I can only imagine the kind of litigation activity that will be going on when the market decides not to cooperate.

What makes more sense is for such salesmen to be required to identify themselves as 'sales representatives' or some such term to reflect how they are compensated....and to ban the use of the term 'advisor' or any other related term that suggest they have the investor's interests as a priority to their own.

A part of our economy runs on services provided by salesmen. Those who use salesmen will tell you that they are potentially valuable in providing information on their product lines...information that would be hard for the average buisnessperson or consumer to get on their own. But for this relationship to work, we, the consumer, need to fully understand that these are salesmen whose primary objective is to make the sale. There is absolutely nothing wrong with this. And if the consumer doesn't wish to deal with such a person, but still wishes 'advice', he/she can pay a registered investment adviser directly for it.

BruceM

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73697 of 75616
Subject: Re: HR-2374. Delays adviser fiduciary responsib Date: 11/5/2013 9:00 AM
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Let's delay regulations that allow stockbrokers and insurance agents to pretend they are working in their clients best interest.

Asinine comments aside, the HR bill, if you care to read it, is not to cancel the regulations. It is simply to delay such until the SEC can demonstrate that their new rule will not harm small investors.

Now, let's see if I can respond in kind:

I know small investors are not imporant too you and that all you care about are the 1% so we certainly should not delay the law at all. No such thing as unintended consequences.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73699 of 75616
Subject: Re: HR-2374. Delays adviser fiduciary responsib Date: 11/5/2013 1:38 PM
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I think it is understandable that an industry that depends on fees for services and commissions is very concerned about any changes that might impact their income and employment. Yes, we need to be careful.

Still I think we realize that 3% to fees in the days of 30% stock market returns and 10% interest rates were not very significant. But low interest rates and moderate returns squeezes those margins. They are now much more visible, and the industry does need to adapt to the new reality.

You would think the quality service providers would support means that would drive out the worst offenders. Customers should realize that one way or another they will pay for the services of the people who help them. Those fees should not be hidden.

And why would a professional salesman sell a product that he knows under performs or is not competitive with the market? Let's drive bad products out of the market and give the salesman incentives to sell quality products.

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Author: MartianX Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73700 of 75616
Subject: Re: HR-2374. Delays adviser fiduciary responsib Date: 11/5/2013 3:22 PM
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I am an RIA and as such am held to a fiduciary standard, as the SEC defines it (there is more than one definition).

fwiw, I know people in both industries and don't quite get how a fiduciary standard makes registered investment advisors (not RIA - prohibited) held to a higher standard. Most advisors are paid based on a percentage of assets while many brokers are paid based on either the commissions they sell or an ongoing asset management fee of some type. Neither is required to provide performance standards and/or suitable benchmarks. However, if you go into a ML Online account and Fidelity one too, you can find a IRR-ROI generator. In other words, there are ways to compute performance across both traditional brokers and non-traditional if you know where to look. But I don't think typical folks are aware of this, and in most advisor practices I've seen performance reporting is hardly standard (though in a brokerage relationship they are even rarer still).

Bottom line - I don't quite believe that assigning a 'fiduciary designation' provides one ounce of assurance that a hired gun can do the job and I don't understand why people feel like something magical will happen if the regulations are passed. It is basically up to the client to demand accountability, and the only way to do that is self-educate yourself about what you ought to expect. You can't regulate air. You can't require something and not also have a means to tell if it was enforced.

Course, there are many people who do a great job - but to suggest that an advisor isn't also a salesman isn't realistic either.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73702 of 75616
Subject: Re: HR-2374. Delays adviser fiduciary responsib Date: 11/5/2013 3:38 PM
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I have been through the routine of having the local broker banging on my 89 yo mother's door wanting to sell her another annuity, because he could no longer sell her annuities after she turned 90.

Attorney Generals in states have already stopped some insurance companies from offering annuities to the elderly. It's a bad practice, but people do it anyway.

With so many horror stories of people sold profitable, but inappropriate products, fiduciary responsibility adds yet another layer of accountability.

Abusers can be sued. And they can lose their licenses to practice.

We need more enforcement.

Of course, the bad practice line is fuzzy. In equities, markets can turn against good advice. Was the investor aware of the risks and comfortable with it? In hindsight, what sounds like an opportunity for good returns at somewhat higher risk can turn into a poor performer.

Being overly conservative can also be an unintended consequence. That can make it more difficult for people to earn the returns they need for retirement.

Its important to get it right.

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Author: dbphd Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73703 of 75616
Subject: Re: HR-2374. Delays adviser fiduciary responsib Date: 11/6/2013 1:59 PM
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It's also important to be a able to distinguish between those who advise and those who sell. When my dad died, I discovered lots of front-end heavy investments that lined the pocket of the seller who my dad naively believed was advising him. I set up trust and FBO IRA accounts at Vanguard, and they moved all the funds from Paine (or is it pain) Webber.

db

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73704 of 75616
Subject: Re: HR-2374. Delays adviser fiduciary responsib Date: 11/6/2013 3:15 PM
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It's also important to be a able to distinguish between those who advise and those who sell.

Front-load (or more accurately the absence of such) does mean that you are still not being sold, advised, or both.

He could have all his assets in no load or index funds and still be paying a wrap fee to an agent with or without a fidcuiary responsibility.

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73705 of 75616
Subject: Re: HR-2374. Delays adviser fiduciary responsib Date: 11/6/2013 5:42 PM
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>>>Asinine comments aside, the HR bill, if you care to read it, is not to cancel the regulations. It is simply to delay such until the SEC can demonstrate that their new rule will not harm small investors<<<

I would like to see some cost disclosure on Class C share and annuities.

Small investors might find such illuminating.

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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73706 of 75616
Subject: Re: HR-2374. Delays adviser fiduciary responsib Date: 11/6/2013 8:41 PM
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buzman writes,

I would like to see some cost disclosure on Class C share and annuities.

Small investors might find such illuminating.

</snip>


So would I. The costs embedded in the so-called "low-cost single premium immediate annuity" are large enough to choke a crocodile.

http://retireearlyhomepage.com/bad_annuity.html

intercst

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73707 of 75616
Subject: Re: HR-2374. Delays adviser fiduciary responsib Date: 11/7/2013 9:11 AM
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I would like to see some cost disclosure on Class C share and annuities.

Sure, many firms already require written and verbal disclosure of such with client signature. I know mine does.

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73712 of 75616
Subject: Re: HR-2374. Delays adviser fiduciary responsib Date: 11/7/2013 5:50 PM
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The costs embedded in the so-called "low-cost single premium immediate annuity" are large enough to choke a crocodile.

http://retireearlyhomepage.com/bad_annuity.html

intercst

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This is just another attempt to neuter Dodd-Frank.

Sorry I overlooked SPIA abuse...it's like voter fraud, Acorn scandals or Benghazi

In Q2 2013 SPIA sales were less than $2B while variable annuity sales were over $55B. EIAs keep setting records, too with $9B in sales over the same period.

http://www.limra.com/Posts/PR/News_Releases/Second_Quarter_A...

But John Quixote leads the charge.

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