Weeks ago, I found myself writing testimony I would deliver before the House Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets. The topic was examining the SEC’s Best Interest Rule to see if this “replacement” for the fiduciary rule could ensure that investors’ needs would be put first by financial professionals.
Sorry to say, I felt like Dorothy in the Wizard of Oz after the curtain was pulled back – horrified at the bullying and cowardice on display.
Congress had no shortage of spin masters that day. It disgusted me to watch as these conflicted politicians defended Regulation Best Interest even though it allows financial professionals to partake in sales quotas, contests, and sell higher costing product because it pays higher commissions (which is never in a client’s best interest).
I walked away angry over the fact that those in a position of authority are tainted in the worst of ways and it enables them to politicize the issues and use ignorance and fear to keep the American public fleeced into thinking that lawmakers are looking out for them.
Now, in fairness, there were two bright spots that stood out – Rep. Katie Porter (CA) and Rep. Carolyn Maloney (NY) clearly were looking to strengthen investor protections. So, if you happen to be lucky enough to have one of these fierce ladies representing you – congratulations! They gave me a tiny glimmer of hope that not all politicians are looking to their next high-paying gig.
In the days and weeks following my testimony – I did a slow burn that kept intensifying and no amount of ranting seemed to get it out of me. It percolated in me like a toxic sludge.
My poor husband who had endured the weeks of neurosis leading up to my testimony now had to deal with the aftermath, too. Sometimes, life just isn’t fair.
Coincidentally, we had a number of financial literacy classes scheduled with high school students over the course of the next month. It was there I found some peace.
If I couldn’t beat the bastards – I would work to educate others so they could not be taken advantage of. Armed with the most passionate teacher I know (Tony), we set out and that seemed to be a therapy of sorts.
It reminded me of how, years earlier (before the fiduciary rule was even on the table) he and I would give Investor Self Defense presentations. Over time, we had built up our clients and had less time to devote to these programs – but we had always enjoyed informing others. It is truly at the heart of who we always have been. Nothing has changed.
Today, our emphasis may be on the lack of protections afforded to teachers’ retirement plans – but as long as there is no fiduciary rule governing IRA accounts, college savings plans, and regular brokerage accounts – we are all teachers. We are all vulnerable to fall prey to a convincing sales pitch. We can all fall prey to conflicted salespeople purporting to be trusted advisors. We can all be duped into thinking the sales guy is really working for us, when he is working for a firm who has made campaign contributions to sway politicians into weakening investor protections for their own benefit.
It’s even easier for us to become prey when the gatekeepers in Congress would rather prop up an outdated, inefficient and expensive business model than insist that they do better for investors.
It’s only a matter of time before the public catches on and finds fiduciaries to work with – or low-cost mutual fund companies, like Vanguard which allow investors to do an end-run around expensive product and unhelpful advice. Firms like Betterment are also offering low-cost automated investment options.
The financial services industry should support raising the bar on protections; higher standards give investors confidence and faith in our economic system. That is an important ingredient for economic growth and robust markets.
The brokerage and insurance industries best enjoy their gluttonous feast now because the purge will be violent. And make no mistake – that day will come.
Millennials are breaking with tradition and the old mold will be cracked open. They don’t care who their parents used for investments. In fact, they’re pretty mistrustful of the established way of doing things. Good for them!
Our representatives in Congress should look to raise their standards above their own personal gains and interest. Greater faith in the government is never a bad thing. Apparently, members of Congress didn’t get the memo that Americans find them to be the most mistrusted group.
Sadly, I have to agree.
Unfortunately not everyone realizes that it is open season on investors; we live in a buyer beware environment. For those who are informed, the onus is on us make others aware so they can look out for themselves.
I had the pleasure of speaking with Barry Ritholtz about this experience and he asked me if testifying had been a waste of my time. While it certainly felt fruitless, I did walk away feeling the need to scream from the rooftops: Watch out because the regulators aren’t watching out for you.
Consider this my rooftop. Now do a good turn and let someone less informed know.