Tangent to this is the lack of Financial Education at the High-School and College level in this Country. Don't even get me started on that one...
” That is great if they wanted to convert and go Fee Only on their own, but to Kass Sunstein nudge them? That is not right, just like your old Policy went away with Obamacare.”
Unfortunately the market was not working. Unregulated commission based “financial advisors” were not being transparent about the fees clients were paying. In addition financial advisors were consciously steering clients to high fee investments without showing these clients lower cost alternatives with similar performance.
The appropriate regulatory rule in this situation is to require transparency which the market will not provide on its own. Simply require advisor to disclose all fees clients are paying to them, as well as fees associated with individual investments. For example, an advisor recommends a $10,000 investment in Mutual Fund A. The fund has a 5% load, and 1.5% annual administration fee. In addition the advisor bills the client 1% annually as his/her advisor fee.
In the above scenario the advisor should be required to tell the client up front the 5% load will reduce the amount invested immediately by $500. In addition the return on the fund will be reduced by 2.5% per year (the fund fee and the advisor fee). If the advisor receives any kickbacks or commissions from the fund company for securing the investment, those compensations should also be revealed. Having full information about costs (prices) up front, the client can make an informed decision in his/her best interest.
Without laws or regulations requiring pricing transparency, history demonstrates advisors and investment companies will conceal from individual clients the cost of transactions.
In summary, for markets to work efficiently, there must be complete transparency as to pricing so consumers can make informed decisions. Regulation is needed to ensure price transparency, not the type of services offered. Unfortunately too many regulatory agencies want to regulate the types of services, or how they are delivered.
The markets for health care and legal services are in need of similar price transparency. In today’s world, the internet is a powerful tool for communicating pricing information. Government’s only role should be requiring such pricing information to be truthful and complete. With accurate pricing information, consumers will make informed decisions and markets will be efficient.
Hint: statists and left wing authoritarians wrap everything in the “it’s for the children” (TM). That is how it is written and portrayed for the public. as if all they really care about is their altruistic philanthropic concern for the health and financial well-being of their fellow citizens.
Be cynical.