Skirmishes have finally exploded into an all-out war! The Department of Labor (DOL) at the request of the White House put forth a proposal last April that would require everyone in the financial services
industry to act first and foremost in the best interest of their clients. WHAT!? HERESY!! DESTRUCTION OF A BUSINESS MODEL!!!
WAIT! My financial “advisor” is not required to place my interests before their own? They can make recommendations, sell me stuff, guide me to places that are better for them than me?
But I trust these people, and they are so nice. They send me birthday cards! Reality check: Most financial service providers are sales-based businesses.
Their employees (advisors) act in their employer’s best interest or they end up unemployed.
This is what has caused the current war. The DOL has proposed destroying the business model of a large and powerful industry (lobby).
The public comment phase for the proposal ended Sept. 24, 2015, and the DOL has agreed to make some revisions based on the input…but the revisions won’t make everyone happy.
If sales people have to disclose all their secrets, tell you how much they will make on the deal and do the best thing for you even if they make less money, their world as they know it will indeed will come to an end.
In early February, three senators introduced legislation to stop the DOL rule. One of these bills would altogether kill the proposal. Two House committees have also advanced legislation to replace the rule.
The big lobby machine is working overtime to stop this proposal while the DOL and the White House are determined to push it through this year.
Many in the financial industry opposing the bill insist it will prohibit middle-class savers from getting investment advice because brokerage firms will have significantly increased risk
and regulatory costs – thus making giving and receiving advice more expensive. In other words, it will cost them too much to give unbiased advice.
I can’t tell you how this one will end, and quite frankly we don’t care. We are already fiduciaries to our clients, owe them a duty of loyalty and act solely in their best interest.
Our business model provides us a decent living and the opportunity to sleep well at night knowing our clients are well served. The proposal is a non-event for us.
You, on the other hand, may want to pay attention.