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13 responses to “Study: SEC Fiduciary Delay Costing Retirement Investors $1 Billion per Month”

  1. February 13, 2013 « The Morning Pulse

    […] SEC Fiduciary Delay Costing Retirement Investors $1 Billion per Month […]

  2. Why the Fiduciary Standard Can't Wait: Goldman Sachs Group, Inc. (GS)

    […] cost of waiting: $1 billion a month Last week, an article in Fiduciary News examined some recent academic research that sought to answer the SEC's call to […]

  3. David Dayen: Mysterious Study Backs Financial Adviser Thieves Who Want To Keep Bilking Small Investors « naked capitalism

    […] of interest like this cost retirement investors at least $1 billion a month, because the funds they get channeled into underperform the […]

  4. Joel

    How about the trillions that are in open accounts. Add this to the pile of qualified money and you can see high massive this rip-off is.

  5. Walmart CEO: Food Stamp Cuts Could Be Good for Business

    […] of interest like this cost retirement investors at least $1 billion a month, because the funds they get channeled into underperform the […]

  6. Kate McBride

    Chris — this article is even more important now than when you wrote it. If you go just from Ma 2009 and the Treasury white paper recommending financial reforms, we have 68 Billion in excess costs to investors. But I think this is very conservative. Cheers– Kate McBride

  7. Jim Watkins

    Chris – Excellent article. What makes the delay even more confusing is the fact that FINRA has repeatedly stated that brokers are required to always put a customer’s interests first. (See FINRA 11-25 and 12-25, and the various enforcement cases cited upholding such position.)

  8. Bryan Berry

    Chris – this snowball has been picking up too much speed to not eventually get pushed through as the rule. As more and more true information gets out, one can only hope that plan sponsors – if at the very least in the $10 million and under plans will come to understand the wisdom of working with a true fiduciary. Keep up the good work.

  9. Obama is backing plans to raise standard of brokers – but consumers could be key | Kronosim

    […] billion dollars a month. That’s the approximate cost of America’s failure to forge ahead with one of the reforms that would have the most […]

  10. Obama is backing plans to raise standard of brokers – but consumers could be key | 365 Banking

    […] billion dollars a month. That’s the approximate cost of America’s failure to forge ahead with one of the reforms that would have the most […]

  11. Joe Picillo

    This issue of the SEC defining “Fiduciary,” is a perfect example of big government over-thinking the issues and making something so basically simple into a complex, mixed-up, load of mumbo-jumbo! Our courts have long ago defined the duty owed by a fiduciary, and the standard is actually much older than its first defining. Ideals and expectations of common sense, fair dealing and moral standards defined the duty of a fiduciary long before it became a term of art.

    Simply put, any fiduciary owes his/her client a duty to act in good faith and to the best of his/her ability, to do that which is in the best interests of his/her client. In the case of retirement plans, and indeed, in the case of any investor, this simply requires that a broker perform due diligence and recommend or invest in funds, stocks or otherwise that are expected to provide the greatest return to the investor – essentially the greatest yield – when considering expected growth and rate of return after costs are factored in, with consideration given to the level of risk incurred.

    Let’s use a simple example: Plan Sponsor comes to employee Broker at Brokerage Company XYZ, seeking advice about in which funds the plan should invest. Sponsor wants the Plan to earn as much as possible for the benefit of the Plan members or beneficiaries, but is looking for funds with overall moderate risk at this time. After performing a due diligence review of all available plans in the moderate risk category, the broker has determined that two plans stand out among the rest in terms of risk versus reward and expected gain or yield after annual costs. Plan A, has a lower cost resulting in a higher overall yield by a tenth of a percent. Plan B, with the tenth of a percent lower yield, pays Brokerage Company XYZ a higher fee resulting in the lower overall yield. What does the Broker’s fiduciary duty require of him/her? At the very least, doesn’t Broker have a duty to disclose the higher fee being paid to the Brokerage Company? Shouldn’t the Broker advise the Sponsor that the larger fee to Brokerage is the reason for the one-tenth of a percent difference in expected annual yield? Doesn’t the Broker owe the Sponsor full disclosure in light of the Sponsor’s known fiduciary duty to the plan members, so that the Sponsor has full knowledge upon which to base a decision on how to invest the Plan’s funds?

    Look at it as if it was an individual investor. Doesn’t an individual expect his/her broker to give the best possible advice on how to profitably invest in the market? And doesn’t the individual expect the broker to disclose Broker’s commissions and any fees on every transaction? Doesn’t the individual investor expect his/her broker to advise them if they believe an investment in which the investor is interested carries too much risk to the investor and what the risks are? Why use a broker otherwise?

    When one uses a doctor or lawyer, they expect the professional’s best advice, and their best effort to do what is in the best interest of the patient or client. Indeed, the rules governing those professions require nothing less than one’s best efforts to perform or act in the best interest of the patient or client. Doctors and lawyers are bound to adhere to specific, Rules of Ethics, or face discipline that can be as serious as losing their license to practice. When people are placing their financial futures, (or present investments), in the hands of Brokerages and Brokers, should they expect any less? Should Brokerages handling multi-hundreds of billions of dollars, and brokers handling millions of dollars entrusted to them by others be held to any less of a standard than “the best interests of the client?” Of course not! Yet, the standard continues to be “adequate.” What an absolute farce.

    Shame on the SEC, FINRA and Congress for turning such a simple concept into such a complex issue. The cost to Wall Street of holding Wall Street to a fiduciary standard should have no bearing on the fiduciary standard issue. Whatever the cost to Wall Street, if any, it will be like spitting in the ocean!

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