Advisor Today - March/April 2015 - (Page 64)
By Brian Ashe, CLU
My clients are confused also, but the new "standard of care" will not simplify their financial lives.
am confused, and, evidently, so
are almost all the consumers of
financial products in the United
States. In fact, consumers are
supposedly so confused by the sellers
and manufacturers of financial products
that the Securities and Exchange
Commission (SEC) and the Department
of Labor (DOL) have been engaged
in a huge debate about how best to
help consumers end that confusion and
simplify their financial lives.
The government's solution
What's their solution? A new standard
of care-a "harmonization" of the
fiduciary standard, which most registered investment and broker-dealer
registered reps work under, and the
"suitability" standard, which most
insurance advisors and broker-dealer
registered reps work under.
The first is primarily a fee-based
standard, which purports to always
place the client's interest above
the advisor's, and the second is a
commission-based standard, which
requires the advisor to certify the
"suitability" of the product sold
before it is placed. Obviously, both
relate to how advisors are paid.
So what's the problem for the SEC
and the DOL? Well, this goal of a
new "standard of care" seems pretty
elusive. The SEC and the DOL can't
seem to agree with each other on
the answer. And if two government
agencies can't agree on what the
"standard" should be, well, then, they
will do what government agencies
tend to do-they will just create two
"standards"-one for the SEC and the
other for the DOL. Wow! That will
be helpful to all of us, won't it?
And, of course, neither standard
will guarantee that a consumer won't
get hurt by advisors, because no
government agency has ever been
able to legislate and enforce morality
64 ADVISOR TODAY | March/april 2015
No government agency
has ever been able to
legislate and enforce
(and in this day and age, what does
"morality" mean anyhow?) So, I
guess, in the end, by attempting to
end the confusion, all they have done
is create more confusion. And when
you have confusion, you generally
have . . . litigation. Right?
In fact, when I researched how
the government already helps us
financial folks, I read a paper titled,
"Who Regulates Whom and How?
An Overview of U.S. Financial
Regulatory Policy," published on
May 28, 2013, by the Congressional
And you know what? I was happy
to find that our government already
makes reference to 25 different
acronyms for financial regulatory
and authoritative bodies.
For example, did you that that
the Dodd-Frank (DFA) legislation
that was passed to correct financial
problems after the 2008 crises created
the Financial Oversight Council
(FSOC) to monitor systemic risk,
and also created the new Consumer
Financial Protection Bureau (CFPB)?
And, of course, the Federal
Housing Finance Agency (FHFA)
already oversees governmentsponsored enterprises (GSEs)
like Fannie Mae (FNMA-short
for Federal National Mortgage
Association) and Freddie Mac
(FHLMC-short for Federal Home
Loan Mortgage Corporation), but
also regulates the Federal Home
Loan Bank (FHLB)?
Whew! Where was I?
Oh, but you probably know all
that. And you probably feel a lot
safer knowing that Congress and
Beltway bureaucrats have always
made things "simpler" for all of us
before, because they "know better"
when they problem-solve.
By the way, did I mention that
Fannie Mae and Freddie Mac were
placed into federal "conservatorship"
by the U.S. Treasury in 2008
because of their contribution to the
So, I'm still kinda' confused by
this "standard of care" thing. Would
it be so hard to just allow advisors
to say to their clients: "I get paid
a commission by the companies I
place business with? You don't pay
me a separate fee," or, "I charge a
fee for my advice to you. But I don't
get a paid commission when you
choose a product?"
I think consumers would
understand that. Naw. That would
be too easy.
Brian Ashe, CLU, is president of Brian
Ashe and Associates, Ltd., in Lisle,
Ill., and the 2012 recipient of the John
Newton Russell Memorial Award.
A past president of MDRT and past
chair of LIFE, he may be contacted at
Table of Contents for the Digital Edition of Advisor Today - March/April 2015
From The Editor
The Power of Going the Extra Mile
The Advisor’s Real Job
How to Improve Your Life Sales
Lifetime Transfer Planning
I Did Not Check the Box!
How I Got a Jump Start on My Day
The Next Generation of High-Limit DI Plans
The Gift of a Lifetime
Preparing Your Clients for Retirement
LTCI Trends and Opportunities
LTCI Riders for the Sandwich Generation
Increasing Demand for Special-Needs Advice
Top Tips for Selling Annuities
Entering the 401(k) Market
Reaching Diverse Markets
NAIFA Government Relations
Sales Ideas for a Profitable Practice
Five Things Your Client Is Thinking . . .
Advisor Today - March/April 2015