So now we're going to undo the fiduciary rule and dismantle Dodd Frank. Anybody care to defend either of these actions?
@ 7 months ago
Yellow Springs, OH 45387, USA
Expenses are passed on to depositors in the form of fees and reduced benefits
Lending policy is tighter than a duck's butt
Small businesses suffer
@ 7 months ago
Villa Park, IL, USA
Went from too much risk to too little
DF has little effect on regional or community banks. The small business arguement is the normal smoke screen to hide the real intent of giving in to the big bank lobbyists.
@ 7 months ago
This was also the arguement to end Glass Steagall. That was ended by a republican congress, signed by Clinton. We know how well that turned out.
Aside from the fact they are disappearing at an alarming rate
I'm actually seeing significant effect.
Those who survive are doing OK mainly due to loss of competition. The consumer is ultimately the one hurt by massive regulation
Classic case of government not letting a crisis go to waste
I'm not saying nothing should have been done, I'm saying they went too far
Derivative transparency being one good element
one example, home equity loans are nearly impossible to get now, valuations 35% market being common
That must be a regional thing. Home mortgage money around here is almost at 2008 levels. The only difference is a higher income requirement. And that's a good thing.
DF is really not that restrictive. Requiring three percent of capitol being held in reserve is just prudent. And if you look at the bank annual reports, they can't complain. Well I guess they can. They always do.
I'm going to ask my investment banker friend, he's smarter than me on such items.
Elmhurst, IL, USA
Btw looking at the US as a whole, home values are not near what they peaked at ten years ago
And home equity loan valuations are not on the same scale as a market valuation, just to be clear
Home valuations are still down a little. But ten years ago they were overpriced. Thus the bubble.
As far as I'm concerned, investment and banking don't belong in the same institution. I'm pretty sure that battle is lost. I'd be satisfied with
responsible investment. That's probably asking too much. They've proven they can't draw a line. So I favor regulating them into being financially accountable.
The fiduciary rule. This is so simple. It requires money managers who handle pension and 401 accounts to act in the best interest of the account holder. This scares the hell out of money managers who steer their clients into high cost
funds and annuities. They are more interested in their own profit than in the return of their clients.
Most people don't have the background to make decisions regarding investment purchases. And the field is so loaded with hucksters, the odds of finding a good manager are pretty slim.
Sounds good but mainly just weighs down small CFPs with costly operational expenses
Not everyone involved in financial planning is out to getcha! The honest ones deserve to set their own price, it's up to the client to request an explanation of their fees. How far should we go with the nanny state?
Many are, and they ruined it for everyone else. They earned this rule.
@ 7 months ago
But it's hurting the honest ones
All this rule does is prevent them from putting their own financial interest ahead of their client.
This shouldn't affect honest ones, who already do that
And it hasn't been hurting anyone yet. That's a bullshït argument.
The rule doesn't go into effect until April.
Do you think smaller CFP operations haven't already been affected by the costs required to ensure they'll comply with the rule?
What CFPs will start doing is setting higher investment minimums as smaller investors will not be worth the trouble.
CFPs will merge to stay viable and to offset costs (similar effect to Dodd Frank on banks/credit unions)
The small to mid size investor will be left taking financial advice from Uncle Rico...I wonder how costly that will be
And if you're wondering who that typical investor is? Small businesses
The new rule will gold clad the steeple, but allow the foundation to crack
Wait, I thought you were concerned about the honest ones who were already complying with the rule. They won't be affected.
Now those that derive a significant amount of income from taking advantage of investors under current law - they can cry me a river.
What's the difference between taking financial advice from Uncle Rico and someone who wants to take advantage of you to make themselves rich.
You are screwed either way.
This has no effect on the fees charged by CFPs. They can set their own rates. That is a transparent cost. This rule has to do with the hidden costs of financial vehicles. It's the difference between putting a client into a fund that has a .09%
The rule requires more than just being honest, it sets an investment mix standard which must be adhered to and this adherence must be meticulous in how it is reported. Such burdens make anyone lacking assets burdensome to the advisor.
You use the word significant as it is obvious what that number is.
Where does the "significant" number lie exactly?
management fee and a comparable fund with a 3.5% fee.
And this only applies to pension accounts. Any standard investment accounts are not affected.
Only pension accounts yes, which affects small businesses and their ability to offer competitive benefits
There will be consequences, some positive some negative
I'm not sure which way the scales will tip
The mix of investments is extremely flexible. The client is the driving force in the decision of risk level.
A good test for choosing a FP is to tell him that you want to put 50% of your account into a Vanguard S&P index fund. If he tries to talk you out of it, look elsewhere.
Just how small of a business are you talking about? The only way to avoid prohibitive accounting, legal, and actuarial costs would be to seek out an institutional provider who specializes in that sector.
And damn, I'm sorry. It looks like you're being ganged up on again.
If it wasn't for me, you and Skål would be left to ravage the landscape
I admire the courage of your convictions. However misguided they may be. Ha!
And Trump's advisor on banking regulation is......
You take the high road and I'll take the low road
Re "significant": I don't have a number, but I consider it a shady, predatory practice.
If a business is freaking out right now because they rely on that income, they're the problem.
"Such burdens make anyone lacking assets burdensome to the advisor."
So they won't have access to someone who gives advice based their own financial interest (not the client's).
Yeah...I'm ok with that
My quote and your comment aren't compatible in all instances
Naperville, IL, USA
Of course not. But as JC mentioned, the field is overrun with hucksters.
External regulation happens when you can't regulate yourself.
One of the great things DF did was provide protections against predatory lending. Stopped foreclosure mills, etc.
This same group is a big target of predatory advising that the rule aimed to help.
Well, not exactly the same - but still a information asymmetry problem.
Do people even know that they weren't required to act in the client's best interest to begin with?
Not entirely accurate, but being a fiduciary brings bigger penalties for not complying with a more complex set of rules
You can't increase the cost of doing business while simultaneously regulating income and expect good things to happen
It's not about regulating income.
It's about stopping a predatory practice that churns through people's retirement funds.
The industry protesting this rule sounds like an orchestra of nanoscale violins.
Think of it this way. If you go to a doc, do you expect them to be looking out for your health or their pocketbook?
They usually look out for both
What do you expect to take precedence?
I expect the exchange to be as equitable as possible.
While I find it hard to believe you expect them to be just as focused on their pocketbook as your health, let's work with that.
Imagine a scenario where the overwhelming majority of docs made choices to maximize their wealth at the expense of their patients' health.
A fiduciary rule would make sense here, right?
Keep in mind, the rule wouldn't cause the doc to lose money. They'd just make less than what they did before.
How much less?
You say overwhelming majority, I say an unfortunate few...
Wait are we talking about radicalized Muslims or financial planners
If it's still positive, should it matter how much less? Their greed is harming their clients.
Enough would be made to keep the lights on.
Just not nearly as lucrative.
I get hit up by financial planners all the time. I've found about 2 that pass JC's test.
I can't wait to open up my business designed to make just enough to keep the lights on lol
You should start ripping people off then. Much more lucrative.
Docs advise you on your health.
FPs advise you on your investments.
You hire both because of information asymmetry. it's not unreasonable to expect they don't rip you off with their advice to enrich themselves.
haha, don't be so dramatic
It's not really dramatic when that's what has been happening.
That's the whole reason for the FP rule in the first place.
On what scale? What percentage of financial advisors refused to show their fee schedule? what percentage knowingly invested their client's money into excessive risk?
BTW, the Vanguard 500 is an excellent investment base so no argument there
Well we agree on one thing.
An index fund is a good thing.
Now let's talk about management fees of mutual funds. These are hidden for the most part. If your FP puts you into a B class share of a given fund you eill see no commision, and no fees will be shown on your statement. You could be paying up to 4% of
your investment until the shares revert to A class shares. Usually about five years. But before that happens, he will find another great fund. You are convinced to transfer into that fund at no cost to you. All the while he is receiving a chunk of
the funds management fee.
This is unfortunately the sop for most FPs. There are no funds worth those kinds of fees. It's a sham meant to take advantage of the ill informed.
How many do this? 50%. 25% .05%?
Over 50% of run of the mill FPs. It's a pretty standard practice. Edward Jones is good example. Basically a fast food franchise for retired teachers who use that background to become financial advisors.
The background involves having a list of previous students to prey upon.
How did you save yourself from such a fate?
Which fate? Evolving into an unscrupulous financial advisor? I lacked a list of potential victims. And I hate cheap suits.
No being scammed by one
I assume your unscrupulous behaviors come in much more creative forms
I learned the hard way. Many years ago. Then a friend of mine explained a few rules of investing. The first being that bankers and brokers are the biggest hustlers you'll ever meet.
He then went on to warn about insurance salesmen. I found that amusing because that was his profession.
Whole life insurance is typically pretty rough
Northwestern is tolerable as a percentage of a personal investment portfolio
Elmhurst, IL 60126, USA
I was hoping Pink would tag in to help me but he's busy playing with his rat
Never will the word huckster be used as liberally again