Will the DOL jerk the football away from those advocating for the fiduciary standard?
W. Scott Simon is a principal at Prudent Investor Advisors, a registered investment advisory firm. He also provides services as a consultant and expert witness on fiduciary issues in litigation and arbitrations. Simon is the recipient of the 2012 Tamar Frankel Fiduciary of the Year Award.
Note: This is the second month in a row that January's column, which was the first in a multipart series examining a public school district's 403(b) plan agreement, has been interrupted. But fast-breaking events have required me to postpone once more a return to that subject. Hopefully, April's column will pick it up again.
By nature, I'm an optimistic chap. Friends and family have always marveled at my famously peachy disposition. But after reading through the U.S. Department of Labor's (DOL) Frequently Asked Questions: Protecting Retirement Savings (FAQs), issued in conjunction with President Obama's speech before AARP on Feb. 23 advocating for a fiduciary definition by the DOL, I must admit that I've turned into a Gloomy Gus concerning the latest developments in what I've termed, in other columns, the fiduciary wars.
The DOL's FAQs reminded me of the comic strip Peanuts. Every fall, Lucy would offer to be the holder so that Charlie Brown could place-kick his football to begin the season. At the last moment, though, Lucy would inevitably jerk the football away, Charlie Brown would go flying through the air and land on his back, looking up at the clouds and emitting a big sigh. Every autumn Lucy promised Charlie Brown that she wouldn't do what she did last autumn, but she never kept her promise. As a result, Charlie Brown always ended up exasperated.
So, too, some of us that advocate for the fiduciary standard feel exasperated by the latest thinking from the DOL concerning its proposed fiduciary definition. If such indications turn out to be accurate, then we will end up with the worst of all worlds: continuing in place certain business models--which largely are the reason many participants in retirement plans get the short end of the stick in the first place--as long as they are coupled with disclosures of conflicts of interest, and then blessing all with the fiduciary moniker. Voilá! Presenting a new fiduciary standard twisted into a simple bundled disclosure of conflicts.
The old adage, "Be careful what you wish for," could not be more apropos.
No one more than I truly wishes that I'm 100% wrong about all this. But time and again during the fiduciary wars that have raged over a good part of the last decade, those forces that just don't want to be fiduciaries have managed to delay proposals (much less implementation of them) that would subject stockbrokers, insurance agents, those with such nebulous titles as "wealth managers," "financial planners," "retirement experts" as well other various and sundry "advisors" to a legally meaningful fiduciary standard. The business models that many of these brokers, et al. use allows them to suck a lot more money out of plan participants than would be the case if they were subjected to a legally meaningful fiduciary standard. Their huge war chests and the vast political power they buy allow them to continue impacting plan participants in such harmful ways.