In the article found here, the press is reporting on the fact that now with a Republican administration in place, the environment is not amenable to put new fiduciary rules in place - specifically from the SEC. Here's a quick explanation of where we are.A couple definitions - a broker, also called registered rep, is a financial professional that sells products and receives commission. That's a conflict of interest because they could sell you a product that benefits them more and you less. Follow the money; their loyalty is likely to go to the product or transaction instead of you.A fiduciary is a registered investment advisor. This is not a "financial advisor". Anyone can call themselves a "financial advisor" - so it is a very misleading term.Some pros are licensed for BOTH. This is called "dually registered". At any time, you don't know which hat they are wearing!Democrats, who have a guiding principle of protecting consumers from themselves and corporations, want to force brokers to act with a fiduciary level of care as do Registered Investment Advisors. Therefore all financial professionals in investing would be fiduciaries. What's wrong with that? Well, sadly in Washington, the Lobbyists carry a lot of weight. By the time the law gets voted in, it's been so watered down as to make it worthless. This is what happened to the Fiduciary Rule passed during the Obama Administration.Republicans, who have a guiding principle of free markets, want consumers and brokers to have as much freedom a possible. This means that brokers will continue sometimes doing harm due to their conflicts of interest. In fact, recently Washington has looked at actually promoting the idea of annuities - which are awful.What would we do? I'd like for the following to happen:
- Make the fiduciary standard, RIA, even more stringent.
- Don't allow dual registration.
- Don't allow anyone to be called financial advisors - except for investment advisors.
- Force brokers to be more obvious in disclosing their conflicts of interest.
- Force more transparency in the most egregious broker payment schemes.
That won't likely happen and in that case I am happy with the status quo - consumers have choices - and hopefully most will see the light that RIAs are the best way to go, and therefore have a greater likelihood of possessing more money at the end of the day.