Fiduciary Links: Why SEC-DOL "Coordination" isn't Good for Investor Protection
Posted by fi360 Team on May 28, 2013
>>>>In his most recent Fiduciary Corner column, fi360 CEO Blaine Aikin addresses the call for greater “coordination” between the SEC and DOL as they each work on fiduciary rules. His conclusion is that the motivation is not to create a more efficient or effective regulatory scheme. Rather, it is part of a broader effort to avoid true fiduciary accountability for transactional brokers and agents who provide personalized advice, as well as for their employers. Just as “harmonization” has become a code word for dilution of the fiduciary standard for the provision of personalized advice to retail investors, “coordination” is a new euphemism for a push to avoid or weaken the ERISA fiduciary standard for advice provided to retirement plans and plan participants.
The call for “coordination” first appeared in response to the SEC’s request for data related to potential fiduciary rulemaking under Section 913 of the Dodd-Frank Act. Comments from a law firm that represents brokerage, mutual fund and banking clients contend that if the DOL re-proposes its expanded definition of fiduciary before the SEC decides whether to extend the fiduciary standard to brokers who advise retail clients, the SEC analysis of costs and benefits will be irreparably harmed. Moreover, they suggest that investors are easily confused by differences in DOL and SEC rules pertaining to the regulation of retirement assets versus assets not held in retirement assets. Now there is a bill pending in Congress that would create a “coordination” mandate.
The real source of investor confusion is that personalized advice is now offered by fiduciaries and non-fiduciaries alike. “Coordination” is a red herring argument designed to distract from that reality and divert attention from the central purpose of regulatory reform and the core responsibilities of the SEC and DOL – investor protection.
A closer look below the surface-level appeal of the “coordination” concept reveals the weaknesses of the idea. It is not only at odds with investor protection objectives, it disregards the reasons why the regulatory regimes of retirement and non-retirement accounts are different and obscures the fact that costs and benefits are most appropriately assessed in the context of the different types of accounts involved.
For more on this topic, including how the very idea of “coordination” ignores Congress’s intent when the Investment Advisers Act of 1940 and ERISA were enacted, read Blaine’s full column at InvestmentNews.com.
Now on to the rest of the best links from last week:
News and columns from the leading trade, consumer, and mainstream media:
- Brokers need to do a better job discussing risk with clients, says FINRA's Ketchum [InvestmentNews]
- Many financial advisers are claiming they gain new business not from client referrals, but from fellow professionals. [InvestmentNews]
- Advisers learn some hard lessons from Oklahoma twister: keeping detailed client info readily available and backed up, offsite, is crucial. [InvestmentNews]
- Obama names replacements for SEC's Walter and Paredes. The nominations now go to the Senate Banking Committee and then to the full Senate. [AdvisorOne]
- Investors show a strong commitment to alernative strategies when it comes to diversifying their portfolios. [AdvisorOne]
- How to encourage the reluctant retiree, who is financially ready to retire, but not psychologically ready, that the time is right. [Wealth Management]
- How to say no to the wrong prospects [Financial Planning]
- Expand your book of business without neglecting clients [Financial Planning]
From the organizations/associations/government/academia:
- Financial Planning Coalition expressed concern last week that draft legislations may slow fiduciary standard rulemaking, leaving consumers vulnerable. [CFPBoard]
- CEFEX certifies Professional Capital Services, LLC in Philadelphia, PA. [CEFEX]
From the blogs:
- The business case for a true fiduciary standard [Scholarly Financial Planner]
- Trending topics for ERISA plan sponsors. [FiduciaryNews]
- Plan sponsor quick tips: fee disclosure resources. [401kBasics]
- To avoid awkwardness in the afterlife, confirm your beneficiary designations. [GettingYourFinancialDucksinaRow]
Articles your clients are reading (or should be):
- What do you do when you are earning too little to save for retirement? [USNews]
- Save more for college education with a 529 plan. [USNews]
Have a link we missed? Leave them in the comments section or email us at blog@fi360.com. For more of the best links during the week, make sure you follow us on Twitter.
