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IBD's Paul Katzeff: Trump makes his first move against the fiduciary rule for financial advisors
Brokers don't want to be forced to do what's best for clients rather than what's best for their own income. Now the president lines up on the side of brokers.
Glad the President has put a squelch on this as my broker said that they would have to charge more becoming a fiduciary; however, older exisitng accounts would be grandfathered with no new money being allowed. This is fine with me, since I am now retired and in the distribution phase of investing. I'm taking out ... not putting in.
Hi @Old_Skeet Don't know about what your broker noted to you; as to whether any or all fees would have to be adjusted or anything else. I recall that was the claim by many of the large full service investment organizations. One must suppose that if this plan went to the chopping block today (Feb. 3, 2017) that it must not have any benefit or protection to the small investor. I see the reversal of this as a "full service investment advisor protection plan".
From the article:"Reaction to the Fiduciary Rule There’s little doubt that the 40-year-old ERISA rules were overdue for a change, and many industry groups have already jumped onboard with the new plan, including the CFP Board, the Financial Planning Association (FPA), and the National Association of Personal Financial Advisors (NAPFA). Supporters applauded the new rule, saying it should increase and streamline transparency for investors, make conversations easier for advisors entertaining changes, and most of all, prevent abuses on the part of financial advisors, such as excessive commissions and investment churning for reasons of compensation."
>>>If enough of the young ones investing today are on the ball, they will travel the path of bypassing "full service, full fee" shops. One may anticipate more investment moves (small retail investors on their own) towards robo, etfs and index funds. Houses as Fidelity and Schwab, to name two; have full and complete investment paths without the big fees. Sadly, the vast majority will not seek to become knowledgeable and pay the big fees in too many cases for "coin toss" advice and/or investment choices. Sadly number two is that too many of the same folks work their butts to the bone and won't or don't have the time to be educated on how to invest their hard earned monies.
One may presume the original fiduciary legislation was not needed.
Reminds me of a used vehicle test a month ago. A friend is interested in a Chevy Equinox. He found a very nice one nearby. One owner, low mileage and fairly priced for the existing market. The test drive proved to be the primary killer for the deal. Some model years for this vehicle are known to have a transmission solenoid problem which prevents a proper down shift to accelerate. Six out of six attempts to merge properly onto an interstate highway displayed this most serious and dangerous circumstance. Upon return to the dealership and presenting this information, the "salesperson" asked whether he might be interested in a Chevy Traverse. A portion of the final sales price indicated a charge of $150 for the dealer inspection and certification of some functions. We agreed that there were 4 tires, all the lights seemed to function, etc. The vehicle has been sold to someone, and probably still has a failed transmission. I'll keep my eyes open to note whether this vehicle is anywhere near my vehicle, so that I may leave the area.
I'm sure most of us have known about some of the less ethical "advisors". I've had a few very funny conversations with some over the years.
Okay, not enough time remaining on this life clock for more research into this subject.
I don't understand in today's day and age, why anyone needs brokers. Broker's fiduciary rules...huh? Financial Advisor yeah. Broker WTF? Just go buy your own stocks. What do you need broker for?
Hi @VintageFreak Agree..............our house has had accounts via Fidelity since the late 1970's with a brokerage feature (not the real person "broker"). We have more than enough places to travel for our investments via our self-operated brokerage. But, the legislation in question relates to "other"; as financial advisers, planners, etc.; charging a fee, relative to an individual investor for the most part. Take care, Catch
Old_skeet, reading between the lines it sounds like your broker is saying, "we have been making money off you by putting our own money-making needs first for so many years. Now with government regulations trying to protect you the consumer, we will have to be more creative in how we make money".
Sounds like an idle threat to me. In today's world brokers are a thing of the past and they know it. Believe me. I used to make photographic film... I know what change looks like
@MikeM Bingo! I just started reading this thread now, and when I saw OS's post, my thought was along the same lines: Your choice - we can rip you off and you won't even know it, or we can do what's best for you at an honest rate.
I did not take the message spoken by my broker as a threat in any way. Although, I have had only three brokers in my lifetime starting with my dad's broker when I first began investing in my early teens and another one of my father's brokers which lasted me through my late middle age years and now the third who I am currently with.
The message as it resonated with me was since the government is now requiring us to become a fiduciary with respect to retirement accounts we will have to make some adjustments. I had a choice to keep what I had "a traditional self directed ira account" and continue as in the past with the exception being no new money could be added and no new purchases could be made although I could do net asset value exchanges within the same family of funds held. This suited me because I am retired making no new contributions to my ira account and I still have many choices to do nav exchanges within the fund families owned. In keeping what I had there would be no additional fees, account charges, etc. as the account would become grandfathered.
The other two choices were fee based accounts of which I elected to pass on. Don't remember much about them although he briefly described them to me. I was not interested in fee based accounts period as they are loaded with on-going fees.
So for me, life goes on much like it did in the past weather the fiduciary rule takes effect or goes by the way side ... I'll still have what I have and pay no more and/or no less.
Personally, I did not think things were broke to begin with. It appears to me the rule would have allowed many old school brokerage houses to open new lines of fee based accounts; and, I estimate if I had gone along and switched to a fee base structure I'd be paying more that I pay now which Morningstar estimates to be about 0.86% for everything all inclusive. My assets are such that I pay no account fee directly to my broker whatsoever although they receive 12b-1 fees from my funds owned. Morningstar also estimates on a similarly weighted hypotetical portfolio I could expect to pay up to 1.22%.
To me, the fiduciary rule was just another way for brokers to collect more by becoming a fiduciary.
I'm thinking ... for me ... I've got a good thing and plan to keep it.
A fiduciary rule simply requires brokers to act in your best interest. Part of the regulation allows brokers to continue charging commissions/loads so long as they are acting in your best interests and you sign a document essentially acknowledging how they're getting paid and they acknowledge they're fiduciaries. (I'm not going to go and look up the details of the BICE exemption again.)
Lots of brokers are using this as an excuse to move small investors into more lucrative wrap accounts. They're not allowed to force you into wrap accounts if it's not in your best interest (as it clearly isn't for you), so they're just taking away the other options and blaming the DOL.
Comments
Glad the President has put a squelch on this as my broker said that they would have to charge more becoming a fiduciary; however, older exisitng accounts would be grandfathered with no new money being allowed. This is fine with me, since I am now retired and in the distribution phase of investing. I'm taking out ... not putting in.
Old_Skeet
One must suppose that if this plan went to the chopping block today (Feb. 3, 2017) that it must not have any benefit or protection to the small investor. I see the reversal of this as a "full service investment advisor protection plan".
Investopedia's Feb. 3, 2017 write about the possible changes
From the article:"Reaction to the Fiduciary Rule
There’s little doubt that the 40-year-old ERISA rules were overdue for a change, and many industry groups have already jumped onboard with the new plan, including the CFP Board, the Financial Planning Association (FPA), and the National Association of Personal Financial Advisors (NAPFA). Supporters applauded the new rule, saying it should increase and streamline transparency for investors, make conversations easier for advisors entertaining changes, and most of all, prevent abuses on the part of financial advisors, such as excessive commissions and investment churning for reasons of compensation."
>>>If enough of the young ones investing today are on the ball, they will travel the path of bypassing "full service, full fee" shops. One may anticipate more investment moves (small retail investors on their own) towards robo, etfs and index funds. Houses as Fidelity and Schwab, to name two; have full and complete investment paths without the big fees.
Sadly, the vast majority will not seek to become knowledgeable and pay the big fees in too many cases for "coin toss" advice and/or investment choices. Sadly number two is that too many of the same folks work their butts to the bone and won't or don't have the time to be educated on how to invest their hard earned monies.
One may presume the original fiduciary legislation was not needed.
Reminds me of a used vehicle test a month ago. A friend is interested in a Chevy Equinox. He found a very nice one nearby. One owner, low mileage and fairly priced for the existing market. The test drive proved to be the primary killer for the deal. Some model years for this vehicle are known to have a transmission solenoid problem which prevents a proper down shift to accelerate. Six out of six attempts to merge properly onto an interstate highway displayed this most serious and dangerous circumstance. Upon return to the dealership and presenting this information, the "salesperson" asked whether he might be interested in a Chevy Traverse. A portion of the final sales price indicated a charge of $150 for the dealer inspection and certification of some functions.
We agreed that there were 4 tires, all the lights seemed to function, etc. The vehicle has been sold to someone, and probably still has a failed transmission. I'll keep my eyes open to note whether this vehicle is anywhere near my vehicle, so that I may leave the area.
I'm sure most of us have known about some of the less ethical "advisors". I've had a few very funny conversations with some over the years.
Okay, not enough time remaining on this life clock for more research into this subject.
Agree..............our house has had accounts via Fidelity since the late 1970's with a brokerage feature (not the real person "broker").
We have more than enough places to travel for our investments via our self-operated brokerage.
But, the legislation in question relates to "other"; as financial advisers, planners, etc.; charging a fee, relative to an individual investor for the most part.
Take care,
Catch
And you believed him or her. Somehow that does not sound like you.
Sounds like an idle threat to me. In today's world brokers are a thing of the past and they know it. Believe me. I used to make photographic film... I know what change looks like
Thanks for making comment. And, now back to you.
I did not take the message spoken by my broker as a threat in any way. Although, I have had only three brokers in my lifetime starting with my dad's broker when I first began investing in my early teens and another one of my father's brokers which lasted me through my late middle age years and now the third who I am currently with.
The message as it resonated with me was since the government is now requiring us to become a fiduciary with respect to retirement accounts we will have to make some adjustments. I had a choice to keep what I had "a traditional self directed ira account" and continue as in the past with the exception being no new money could be added and no new purchases could be made although I could do net asset value exchanges within the same family of funds held. This suited me because I am retired making no new contributions to my ira account and I still have many choices to do nav exchanges within the fund families owned. In keeping what I had there would be no additional fees, account charges, etc. as the account would become grandfathered.
The other two choices were fee based accounts of which I elected to pass on. Don't remember much about them although he briefly described them to me. I was not interested in fee based accounts period as they are loaded with on-going fees.
So for me, life goes on much like it did in the past weather the fiduciary rule takes effect or goes by the way side ... I'll still have what I have and pay no more and/or no less.
Personally, I did not think things were broke to begin with. It appears to me the rule would have allowed many old school brokerage houses to open new lines of fee based accounts; and, I estimate if I had gone along and switched to a fee base structure I'd be paying more that I pay now which Morningstar estimates to be about 0.86% for everything all inclusive. My assets are such that I pay no account fee directly to my broker whatsoever although they receive 12b-1 fees from my funds owned. Morningstar also estimates on a similarly weighted hypotetical portfolio I could expect to pay up to 1.22%.
To me, the fiduciary rule was just another way for brokers to collect more by becoming a fiduciary.
I'm thinking ... for me ... I've got a good thing and plan to keep it.
Old_Skeet
Lots of brokers are using this as an excuse to move small investors into more lucrative wrap accounts. They're not allowed to force you into wrap accounts if it's not in your best interest (as it clearly isn't for you), so they're just taking away the other options and blaming the DOL.