The profession is about to face some of the biggest challenges in its history. Let’s meet them head on, the way we always have.
Based on past statements from Republican officials on Capitol Hill, there is every reason to believe that an undivided Republican Congress will repeal the Dodd-Frank Act, and President Trump will unravel the DOL fiduciary rule. The odds are that all this will happen within the first couple of months of the new year.
However you feel about a Trump presidency, this will be a severe setback for the concept of professionalism in the financial planning world, and the strong fiduciary standard generally. I just wrote on the Financial Planning website that I would bet the independent BDs and wirehouses put a hold on their plans to qualify under the BIC exemption at around midnight last night.
And then you wonder: who will be the new SEC chairperson? It’s probably a safe guess that he or she will be open to the concept of “harmonization,” translated as: imposing sales regulation on professional planners who don’t take commissions, and making it more difficult for consumers to distinguish between those with a sales agenda and those who act in the best interests of their clients.
If there’s good news in all this, it’s that the longstanding battle between the emerging profession and the sales culture that would like to strangle it out was never going to be won through regulation. It was always a ground war, about taking market share one consumer at a time and making clear, sharp distinctions between who is and is not a professional. The marketplace will decide who wins and loses, and all the regulators can do is provide a wind at the back or a wind in the face.
As we face the wind in our faces, my plan is to simply work ten times harder, in my public writings, to draw VERY clear distinctions, and use the shift in the wind to the advantage of the profession. There will be interesting things to discuss. Will Merrill Lynch decide to reinstate commissions on IRA accounts? Did it initially remove commissions because it was good for consumers, and is now rescinding the decision? I hope to require the new DOL regime to explain to us why it was such a bad idea to require people holding themselves out as advisors to put the best interests of the consumer first.
I’m hoping my brethren in the press and people in the profession will seize this opportunity to publicize far and wide the duplicity of those sales organizations who appear to have rented our regulatory structure for the next four years.
In the meantime, let me suggest that you consider complying with the DOL Rule even after it’s repealed. By that, I mean: give every client a statement that promises that you’ll act as a fiduciary, which will draw a clear distinction between you and the organizations that are breathing a sigh of relief and dismantling their BICE efforts. Document why you think moving money out of a 401(k) into an IRA benefits the client—or doesn’t, which is why you’re leaving it where it is. Use the DOL standards to your advantage.
The profession has had the wind in its face before, and it has prevailed by taking full advantage of the fact that it has that nebulous thing called “right” on its side. The other side has money, which buys the direction of the regulatory winds, but in the marketplace, sitting on the same side of the table as the client will ultimately win the long ground game that we call “building a profession.” I, for one, plan to use any conflicted regulatory initiatives as extra motivation to win the war the way it was always intended to be won.