Who wouldn’t be for airbags?
Who wouldn’t be for seatbelts?
Who wouldn’t be for increased fuel efficiency standards?
To quote one of my favorite YouTuber creators and the host of the world’s largest philosophy show, Stefan Molyneux – these questions are, “Not an Argument!”
Of course, we are all for auto safety. Some look beyond the intentions of government and intellectuals who support high regulations and see the opposite of the intended consequence is as likely to play out as the law being successful.
Increased fuel efficiency standards increase the cost of production, which lowers auto purchases, and reduces profits and jobs in the auto sector. These laws often lead to lighter and cars that are less safe. The result is increased death, injury, and cost. Some studies show that seatbelts have made drivers more aggressive and this has led to a similar amount of injury – but, the injuries have shifted from the driver to innocent bystanders and others. And, (for more on these and other topics, including the economics of airbags, see another great YouTube podcast TomWoodsTV and this recent podcast with auto writer Eric Peters).
The questions that those who support the DOL’s fiduciary rule, and who ask, “who wouldn’t be for retirement account protections?” have never answered is:
Will the policy actually provide ‘protection’?
At what cost?
On the first question, I’ve made arguments that the rule will not protect investors over several blog posts. The DOL has proposed exemptions to some of the worst and most conflicted advisors – EIA salespersons.
On the cost of the rule, I estimate it would cost my small firm between $1,000 and $2,000 per rollover recommendation in labor, insurance, and technology. That cost would be passed on to new clients, though if the DOL made the rule worse, it may be that at some point I would be forced to pass it on to current clients, as other firms have already done.
In addition, this rule holds open a threat over any advisor who works with IRAs, 401(k)’s, and other employer sponsored plans. There is no way to know if you are complying with the rule.
The costs of the fiduciary rule would not just fall on advisors. Many have stopped receiving simple advice on current assets and have been moved into high cost accounts that they may not have needed. Some have been fired by their advisor or their investment firm, and some have been moved to a call center.
Others in the future may be victim to firms that the DOL was providing exemptions to this rule. These firms would have been given a ‘free pass’ to rip off consumers.
There are real world costs and consequences of ‘government protection’ and the end result is less advice for consumers, higher cost advice for those that can afford it, and worse advice when the government gives exemptions to the worst actors.
(And, I would prefer if the government worried less about increasing the quality of products and services, since auto firms and fiduciary advisors have been doing that pretty well on our own. I'd much rather have them up their own game and fix all of our potholed highways!).
