The rollback of unnecessary regulation is reaping rewards, depending of course on one’s definition of unnecessary.
We’re not crazy enough to argue against the DOL’s fiduciary rule (or at least a fiduciary rule), but is there a better way, one that more successfully satisfies key stakeholders?
Apparently not, if The Wall Street Journal’s SEC rule exposé is any indication. The sticking point is what you’d expect:
“It’s difficult to see how they can come up with a solution that does not land them in court,” Barbara Roper, director of investor protection for the Consumer Federation of America, told the paper. “If they propose a rule we like, the industry will sue them. If they give the industry a disclosure-based best interest standard that they want, we’ll sue them.”
If the SEC’s version is more targeted and avoids the heavy-handedness of the DOL (the proverbial scalpel versus hammer cliché), we understand its appeal.
Without question, over-regulation in the Obama era led to slower growth and muted returns, packaged and sold (unsuccessfully) as the New Normal.
Attempts to argue that any regulation would not adversely impact the long-term viability of the participant portfolio is therefore tough. Which is why a more nuanced SEC version is appealing; the overwhelming majority of advisors do right by their clients, understand the need for viable regulation, but worry about the potential harm from good intentions.
In theory, SEC Commissioner Piwowar’s push to ban the term financial advisor—unless fiduciary responsibility is accepted—makes sense. It’s at least the start of necessary industry and agency penance after entertaining the Merrill Rule madness a decade ago; the deliberate attempt to further obfuscate industry titles to deceive the investing public.
“Mr. Piwowar has a fundamentally sound idea, but I think it needs to be treated more broadly,” Roper conceded, but “more broadly” would put us back in DOL territory and, therefore, why do it at all?
The SEC has at least until July 2019 to figure it out, with the DOL rule as default. We’ll see what they bring.