DOL Fiduciary Rule Failure #241-Regulation Is Reducing Advice

According to, it’s still a law in Michigan that:

  • Putt-putt golf courses must close by 1:00 AM.

  • Couples are banned from making love in an automobile unless the act takes place while the vehicle is parked on the couple’s own property.

  • It is illegal for a man to scowl at his wife on Sunday.

  • It is illegal to let your pig run free in Detroit unless it has a ring in its nose.

  • No person shall throw an abandoned hoop skirt into any street or on any sidewalk, under penalty of a five- dollar fine for each offense.

Once a law is put into place, it rarely keeps up with the times.

Fiduciary financial advisors are making all sorts of excuses as to why they are not sweeping up clients in the market. Many firms experienced negative growth in 2016, as competition from online firms (that this author believes lie about their ‘fiduciary’ status and benefits in other areas) and regulation increased costs on small firms.

A recent article by an intellectual that I do respect in the technical aspects of planning stated that the real ‘blocking point’ in growing financial planning is a lack of awareness.

As a financial advisor with 15 years of experience, I don’t find that at all to be true. I find that I can say I’m a financial planner – and sometimes I can even say I’m a fee-only planner, or fiduciary – and the public largely gets it.

That doesn’t mean they want financial planning services, but, it isn’t from a lack of awareness. It’s from a lack of access, aka government regulations, keeping individuals from getting comprehensive and quality advice from independent advisors.

Our retirement system today is largely monopolies, which by their nature only exist due to government regulation, and as a result of such regulation they increase cost, restrict competition, and reduce quality – they will only provide the advice they must at the lowest level of regulation or consumer demand in order to maximize profits.

Just as old laws are often outdated soon after they are passed, as it is with the regulation in the business of financial advice today, and the proposed DOL Fiduciary Rule. Today, advisors are governed by outdated laws and promote investment services, and ignore the service that Americans need the most – true, holistic, financial advice.

Many think the solution to the problem is to regulate the type and costs of investment services. They claim that the DOL’s Fiduciary Rule will make the market more accountable to investors. That by forcing those who seek IRA advice in to meet with a ‘fiduciary’ – which is a bastardized version of the term that many have applied their own definition to, be it low-cost, or no commission, etc. – they will benefit in the market. The DOL Rule seeks to make all who offer advice a “fiduciary” though they will not be in practice, as we can see from the conflicted advice still in robo-advisors and mutual fund firms that make this claim today.

This is good for some, though I contend and have written about that it will not ultimately benefit those who believe so (NAPFA is the one I am currently a member of and also a non-profit that I believe has left its mission in order to promote harmful laws).

In reality, these groups are virtue signaling and looking for short-term admiration and possible short-term gain, mostly for a few since the majority of their members will face higher costs and even fewer new clients than they attracted in 2016, though in the long-term they will be much less relevant in the market. With only the threat of these laws we have seen costs and regulatory burdens rise on the small to mid-sized firms that make up the majority of the memberships of these associations, while large firms that are not being held to the same standard or are being provided exemptions will take full advantage of their lack of oversight and push these small players out of the market.

Laws are good for those that want to keep the status quo on the current monopolized retirement industry. They benefit those that want to elevate their own status, at the expense of those who they have a duty to serve.

What will be the result of new regulation on these firms as they refuse to stand-up to the growing involvement of government in providing their own investment products – 529 accounts, 529A, state-run IRA and 401(k) plans? How will financial planners and ‘true fiduciaries’ find clients – who typically pay as a percentage of assets managed – when they have a lesser pool of possible clients to draw on?

You won’t be able to tell the government that they are breaking their fiduciary duty by the terrible and conflicted advice they give in the future, just as they are not telling them about the terrible exemption they have offered to Equity Indexed Annuity (EIA) providers.

As groups that are primarily focused on financial planning, and comprehensive planning at that, it is so odd that they are only focused on controlling the behavior of industry participants who are not a part of their membership.

What people need is advice. They have this right. But, by not promoting advice within the current system, they may get a pat on the head from a current Senator or influential government bureaucrat, but they are not moving the ball forward on advice, and will soon be forgotten by these individuals or those who follow them.

It is funny how so many think that the answer to poor government regulations, is more poor government regulations.

What they’ll find is the ‘unintended consequences’ will lead to a more confusion, more rules and costs on true fiduciaries, and less advice, as is the case in every regulation that seeks to do otherwise. The ACA, Dodd-Frank, any other regulation that claimed to lower risk, break up the large, or lower costs, has provided the opposite. They have put out of business the small, raised costs, and increased risk. As we have already seen happen with the DOL’s Fiduciary Rule.

What they should be doing if they believed in financial planning is promoting their own interests rather than trying to regulate others. Tax credits, access for retirement participants to pay for financial planning advice, and ending the monopoly system would all have the actual impact of expanding the consumption of financial planning, improving retirement advice and products, and actually forcing providers to offer comprehensive, ‘true fiduciary’ advice.

Until then, they are just putting financial planning even farther out of the accessibility of the public.

Economic Lesson: It’s the proximate cause that government supporters will always point to as the problem; never the ultimate cause. Financial planning is not accessed or valued today not because consumers don’t want, need, or know about financial planning; it is because financial planners don’t care to promote their own interests in the world of regulation – as EIA groups and robo-advisors are doing (by lying to clients about their benefits, and we all know this with their claims on the benefits of tax loss harvesting).

If we were to compare the retirement market and its failures to a restaurant, we would say – “The customer is at fault for not getting the service or product they want? No, it’s the manager.” The manager of the current retirement system is the government – the ultimate cause. They are the ultimate cause of financial planning not being promoted, and they are not promoting it today.


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