Thank God that it looks like it, at the very least, will be amended. As someone in this field, it was an absolute nightmare of regulations. Cliff notes: This seems to make sense to everyone: In the investment community there are people who will try to bilk people out of their money; this reg was meant to stop that. However, as it was laid out, would have hurt everyone who wasn't a Big Bank; you literally had to have, and I'm not kidding, 150 Million is reserves to be able to transact business. It would kill everyone like myself that thought it made more sense to share profits with clients rather than paying middle mgt., etc. I'm welcome to all questions regarding this. Just recall that prior to Elizabeth Warren taking personal interest in this, even Bernie Freaking Sanders thought this was a bad idea. All roads to... etc. Anyway, this video sums up my feelings towards the Original DOL concept. <iframe src="https://www.facebook.com/plugins/video.php?href=https://www.facebook.com/suzannesomers/videos/10154493576888191/&show_text=0&width=400" width="400" height="400" style="border:none;overflow:hidden" scrolling="no" frameborder="0" allowTransparency="true" allowFullScreen="true"></iframe> EDIT: OK, what am I doing wrong? I was hoping the video would show up on here.
All RIA's have to be within a "Financial Institution" which would require those reserves as the rule stands now.
I'm a big dummy on this issue. Consumers choosing a fiduciary makes sense, but I was unaware of the details from Dodd Frank. Can you point me to somewhere where I can read up on this?
To be honest, I'm not a fan of regulation, but I'm ok with the Dodd Frank bill. Banks really screwed that one up, big-time. There will always be need for rules, but unfortunately, rules damn the marketplace & people they are ultimately trying to help out. I know a lot of folks think I'm stupid, even though I have two degrees, but I do know what I'm talking about with regards to this. I've been in finance and insurance for over 20 years. Hell, I was asked to be a financial analyst back in the 90's. I declined. (Bad Deadpool!) http://www.investopedia.com/terms/d/dodd-frank-financial-regulatory-reform-bill.asp
It only applied to qualified, ie. retirement money, but in this industry, that is 75% of the business.
Honestly, I can't imagine how someone I trust my retirement money to isn't a fiduciary by definition, to begin with.
Coming from a different perspective, I work for a company affected by this rule and we've spent pretty much all of 2016 having to update ALL of our marketing materials to make sure they are in compliance. We wanted to be one of the first in the market to say we are in compliance on or before April of this year, which is when the rule was supposed to start phasing in IIRC. So what are the 'experts' predicting wrt this rule? Kind of hard to predict anything with Trump, I suppose....
From my business, all monies are going through Billion dollar organizations. I work as a wholesaler helping them place their assets in the appropriate vehicle based on their needs and goals. You realize that is how brokerage firms work, right?
The consensus for now is probably a 180 stay to further review it, but nothing is set in stone yet. April 10 is the current doomsday date.
The fiduciary rule is a boon for Money Management firms as most of them were shifting away from commission sales anyway an onto the new bullshit holy grail of "Managed Accounts". They'd rather you pay 1.5% a year for 20 years than buy 20 great securities for 3%-5% up front. All this does is force financial institutions to only be able to do business with larger clients thereby reducing exposure for people that don't have a substantial funds. Most firms have reacted by raising the minimum account values. And ROSCOE I hate to break this to you but your industry is in the midst of a long-term secular decline. 90% of active funds can't beat a managed index and robo-advisors do much better mainly due to the fee structure. I think there will be more and more outflows from managed funds which could eventually cause other problems and/or opportunities. I would hedge your professional bets my man as the Financial Advisor is going the way of the Insurance agent.
My firm is a marketing organization specializing in FIA's, which are doing quite well. In fact, there were a couple that not only guaranteed you would never lose a dime of your money (unless it was surrendered prematurely) but actually beat the S&P. http://annuityoutlookmagazine.com/2016/12/indexed-annuity-sales-on-track-for-60-billion-year/
In an FIA if i'm not mistaken you basically create a floor and a ceiling for returns, so as we've been in low return environment over the last 10 years, this would outperform but under normal long-term circumstances the wider index will outperform. The insurance companies being long-term investors are able to withstand the volatility in order to 'guarantee' a floor and a minimum return. It works for people that will act inappropriately during times of volatility or can't stand the normal swings, but over time you'd do much better in a passive index.
It all has to do with your goals. These are for investors who care more about protection of assets and lifetime income. Growth products are for younger folk who are still able to handle market volatility.
Your lack of an answer, especially being a lawyer, shows how few folk know how to accurately get true investment advice. If you think that Morgan Stanley is actually holding your assets? Seriously? Ugh... This is the problem. Folks don't know how to invest and they need folks to walk them through it.
My lack of an answer shows that I wasn't on the site to respond until now. Yes, I'm very much aware of brokerage firms work. My understanding regarding the new DOL rules is that they're holding financial planners/advisors to a fiduciary standard. I haven't read the rules, but that's my understanding. If I'm wrong on that, let me know. I would expect that financial planners/advisors would be held to that sort of standard....particularly when they're paid out of fees based on how that money is invested, many times. I had a conversation with a financial planner who was really concerned that the fees his clients were being charged would have to be disclosed thoroughly. That reminds me of the stories I heard about lawyers who used send invoices that just said "Services Rendered" with zero explanation to account for what they had done. I hope you didn't take my post as trying to take a stab at you or something; it's not at all what I intended. It seems logical to me that financial advisors would be held to a fiduciary standard.
Roscoe, I think you're taking this rule personally and attacking others making pretty standard sounding questions. There is a term called incentive caused bias you should look up where you see the world one way due to your own financial incentives. And not sure what your question means about Morgan Stanley 'actually holding assets'. If they're in individual securities or bonds or Morgan Stanley products than yes they do, but if in mutual funds, annuities etc. they do not. Seeing how Fixed or Indexed annuities really only exist because 'folks don't know how to invest' and are scared give up long-term returns for perceived safety though the annuity contracts are only as valuable as the insurer guaranteeing them. This is counter-party risk as many AIG annuity holders were shuddering upon their near bankruptcy. Though I may not agree that upon deemed a 'fiduciary', it changes everything, but it does expand the ability for trial lawyers and people to sue investment firms and banks which probably was the point of the whole rule. The Obama administration has opened the floodgates on lawsuits in many areas and this creates just the opportunity to do so.
