“It just goes to show you, it’s always something — if it ain’t one thing, it’s another.” real financial planning
Remember Roseanna Roseannadanna? Gilda Radner’s Saturday Night Live character was the Weekend Update consumer affairs reporter with the catch phrase: “What are ya tryin’ to do, make me sick?!”
I wonder what Roseanne would say about Reg BI? Last month, the Securities and Exchange Commission voted to approve “Regulation Best Interest.”
According to CNBC reporter Bob Pisani, here is the good news, “Broker-dealers (a person or firm in the business of buying and selling securities on behalf of its customers) in particular will be required to act in the best interest of a retail customer when making a recommendation of any securities transaction or investment strategy involving securities to a retail customer.” Furthermore, investment advisors and broker-dealers “will be required to provide retail investors with a standard disclosure document that highlights the services being offered, the legal standards that apply, disclosure of any conflict of interest, and most importantly the fee structure — how they make their money.”
While the rule seems like progress, critics argue that the regulation avoids a fiduciary standard of advice, poorly defines what “best interest” means, and its enforcement rules are weak. Pisani writes, “The advisory community (Wall Street) has fought against this, arguing that earlier versions would invite an avalanche of lawsuits and restrict the ability of Americans to receive investment advice.” Huh?
We need financial products and services. We need manufacturing and distribution of financial products and services. But a culture that describes a day’s work as “production” and refers to its customers as a “book of business” is, well, a sales culture. Why can’t we call a duck a duck? The sales culture continues to beat down the advice culture.
The public is left confused: What is a real financial adviser? (Or is it wealth manager? Or financial planner?) What is the difference? Is it giving advice and providing financial planning? Is it selling insurance and investment products? Is it knowledge or skills or experience or training? According to the Financial Industry Regulatory Authority, there are now 201 certifications and designations for financial professionals. Come again? Full disclosure: I am biased by my family’s history in the financial planning profession, and consider the Certified Financial Planner™ designation as the gold standard for training the skills and knowledge of financial planning. With that advisory skill-set a financial planner might then add training in taxation, insurance and annuities, securities selection, elder care planning, retirement income strategies, portfolio management, etc.
However, today, the title “Financial Adviser” is used by brokers, bankers, insurance agents, financial planners, and even accountants. Some fall under the rules and regulations of the state, others report to the feds. It is not a level playing field and maybe that is okay because it demarks the continual friction between the packaging and distribution of product and the business of personal financial advice.
Note: I know some great Certified Financial Planners™ who work at brokerage firms, banks, and insurance companies, they are fiduciaries in a non-fiduciary environment.
If the government won’t require that anyone dispensing personal financial advice to you be held to a fiduciary standard, then you should do so for yourself.
“Well, Jane, it just goes to show you, it’s always something — if it ain’t one thing, it’s another.” – Roseanna Roseannadanna (RIP).