Posted on 03/21/2017 6:04:48 AM PDT by gattaca
As with much in the first weeks of the incoming Donald Trump administration, there was a last-second move to delay regulations years in the making.
In this case, the Department of Labor fiduciary rule...
As it stands, retirement savers lose $17 billion a year just in fees paid to advisors and funds. The vast majority of investors then fail to match the stock market indexes because of those same fees.
The fiduciary rule doesn't dictate lower-cost advice. Nor does it remove expensive actively managed funds from the marketplace.
Rather, it requires anyone who sells retirement advice for a living to plainly state their fees upfront and to point out to clients when two funds achieve the same purpose but one is cheaper.
(Excerpt) Read more at marketwatch.com ...
“They should ONLY get paid when they make money for their client”
Can’t a client observe the performance of his account and if he’s not happy with it, move to another so-called investment professional?
Maybe what I’m missing is that the elderly as a group are known to be more screwable by the so-called investment professionals.
Why would you assume that? The cost of compliance for many of these stupid rules is enormous.
A number of financial advisors I know have gotten out of the business completely ... not because they're "bad apples," but because they couldn't be bothered dealing with the regulations anymore. How does it serve the customer's interests if their options for finding a financial advisor are shrinking?
And if "they all do this," then do what I'm doing right now and ditch the financial advisor completely.
Exactly.
I don’t want to add rules, I want to take away the rule that advisors can’t do straight percentage of gains. They claim this is a violation of some Depression era rule on fiduciary obligation, unless they are operating on pooled assets (hedge fund, for example). Maybe they are lying, but I get the same answer from all of them.
Just to be clear I don’t agree with the new law, by “do something” I was advocating the elimination of the one on fiduciary obligation that advisors claim bars them from a direct performance based fee structure on individual accounts.
“Most financial advisors I know don’t really care about the Department of Labor rule ... because they were already conducting business that way before the rule was adopted.”
You know different advisers than I do. When advisers get together today, it’s all they’re talking about. Every company is making huge changes because of this rule. Expenses will go up for the average investor. Small investors will lose their brokers to 1-800 numbers. Companies are spending millions trying to figure out how to comply with the rule. Many advisers, often the most honest best ones are retiring rather than moving to investment packages they see as too expensive and not in the clients’ best interests.
“Anyone too dumb to do that shouldn’t invest, or should only do so thru index funds.”
Perhaps I’m too dumb to invest, but I do anyway. I haven’t had a lot of extra time to brush up on “Investing for Dummies” since I’ve often worked more than 40 hours per week, been active in church affairs, and all the rest of what constitutes living. My investments have made money; they were made through a financial adviser that I like just fine. I will say that he—within the last year—has admitted the fees charged haven’t always been prominently displayed in the past on his company’s statements. He only discussed his fees in detail of his own initiative when having me sign forms to comply with the proposed rule last summer.
Why would financial advisers be against a rule prominently showing the fees charged?
The problem is the lack of any journalistic standards, I trust hardly any news these days.
“Why would financial advisers be against a rule prominently showing the fees charged?”
I don’t know any who are against that.
They are against this 2000+ page rule which will raise the cost to their customers and take away investment choices their customers have enjoyed in the past. What I hear most is a version of, “If there are bad apples out there, then go after them. Don’t raise my customers’ costs and limit choices for everyone.”
“Why would financial advisers be against a rule prominently showing the fees charged?”
Why would I believe the media’s summary of what the Good-Hearted Obama was doing, and why the Cruel and Evil Trump has stopped it?
Nor does it take much time to see how much one is about to be charged in management fees. I always knew, and I spend about 30 minutes a YEAR reviewing my investments.
3 adivisors flew in each from a separate city to my IT shop in the IL cornfields to pitch 401k plans to us 15 consultants in one consulting firm. Each played a different role they claimed was mandated by law.
I asked the first advisor how much his fee was. He answered 0.9% and you know what they say, if it starts with a zero, it is good.
Then I asked the 2d advisor the same question. He also answered 0.9%. And the 3d advisor 0.9%. This was in addition to the 2.5% charge of the T-Bill Fund they were selling and 4.5% charge of the cheapest mutual stock fund they were selling.
So the stock market would have to do 7.2% for me to break even. I didn’t like that option and took a pass on the 401k.
Previously I had been suckered into precisely that situation, and that was a no-load, low-expense ratio fund. Even though my mutual fund did well, the expenses and stupidity of the 401k middle men resulted in less money in my fund when I turned 65 than had been subtracted from my paycheck.
“Delaying implementation of the Labor Department rule is the first step Republicans and the finance industry are eyeing as part of a broader overhaul of the measure. GOP Lawmakers have argued that the Securities and Exchange Commission, not the Labor Department, should oversee and regulate any changes related to financial firms.
Banks, asset managers and insurers have been fighting the fiduciary rule ever since the Labor Department approved it last year, saying the regulation could raise the costs of providing advice and make it harder to serve lower-income clients. Business groups including the U.S. Chamber of Commerce and American Council of Life Insurers have sued to try to block it.”
I guess I do. The advisor I deal with directly has been doing business under the Department of Labor rule since long before the rule even existed. He changed from a commission model to a fixed-fee model in the mid-1990s.
There's another issue here that hasn't gotten a lot of attention -- and that is the impact of this proposed rule on employers. I believe one unintended consequence of this rule is that more and more employers are either going to severely reduce the options their employees have in the company 401(k) plans, or they are going to drop their 401(k) plans entirely. Administering this kind of nonsense has become a huge pain in the ass for a lot of small employers.
Not really. Most financial advisor agreements require arbitration in case of disputes, and the arbitration is run through their industry trade group. Guess who the arbitrators tend to side with.
““Why would financial advisers be against a rule prominently showing the fees charged?” “I don’t know any who are against that.”
Good to hear. Keep the mandatory and prominent explanation of fees and commissions and ditch the rest of the 2000+ rule.
“Why would I believe the media’s summary of what the Good-Hearted Obama was doing, and why the Cruel and Evil Trump has stopped it?”
I wouldn’t if I were you.
“Nor does it take much time to see how much one is about to be charged in management fees. I always knew, and I spend about 30 minutes a YEAR reviewing my investments.”
You’re a smart guy.
btt
Went to my broker yesterday (Edward Jones). Due to this new rule and the worry about keeping it to a T, they are going to get rid of the 3-5% ONE TIME cost to invest with them, and are going to charge 1.35% a year EVERY YEAR... Thats about 40% over 30 years instead of 3-5% (of a smaller amount)...
.
HORRIBLE result of the bill....
Given that I was an RIA for 27 years, I can tell you that not everyone is as you describe. I know many, many advisors who work hard to grow portfolios. That is not to say there are not those like your friends. I suggest you choose a different group.If you are telling me you honestly believe that financial advisors make money by building wealth and not by marketing and expanding client base I’ve got a bridge to sell you.
Same. I was the president of a very large association of investment managers. There are great ones out there.When you have 50 clients like me with assets at or over $1M and you are getting 1%+; you get at least $500k per year if you never make them another penny.
I managed a large multiple of that, including a mutual fund and hedge fund. If we did not grow money, we might lose clients. It was not in our best interest to lose money in the markets. It wasn't in the client's best interest to lose money. Worked great.My personal advisor is managing a bit more than that, and she gets very disturbed when I bring this up— I would prefer an arrangement where she is incentivized and is forced to gain wealth by making money on every portfolio, instead of just by expanding client base and coasting. That would force her to do actual analysis, take risk, and be accountable for decisions instead of just parking money in different places. She is the best I have found, because she is like family and absolutely trust her to treat my money like her own, but I want someone who wants to get rich, not treat my money like their own.You are leaving out the costs of running a professional firm, by the way. It isn't all gravy. Just staying compliant is extremely expensive.
You have the wrong advisor, given your expressed preferences. May I suggest you LEAVE and find an advisor you believe is aligned with your purposes? If you stay, you have only yourself to blame. I think you'd be happier if you left.You may qualify as an accredited investor, to have a performance based fee instead of asset-based.
Good luck.
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