This article mainly introduced that the "Fiduciary Rule", which will provide a stricter standard for brokers when they are recommending the "suitable" investment for their retirement savers, was delayed by Trump for 90 days for review.
As mentioned in the article, too often, brokers tend to choose investment based on their own financial interests in stead of the clients. They tend to persuade the retirement savers to put their asset into variable annuities, real estate investment trusts or other investments that can be risky or otherwise not in the client’s best interest. The Obama administration said this rule would be able to save about $4 billion annually.
On the contrast, people who against the rule said that the limiting choices would hurt the investors and the stricter requirements could limit many people’s access to financial guidance and retirement planning and their choice of investment products.
https://www.washingtonpost.com/politics/federal_government/how-stricter-rules-for-brokers-will-affect-retirement-savers/2017/02/03/bfefc2a2-ea6d-11e6-903d-9b11ed7d8d2a_story.html?utm_term=.ccdd195d777a
4 comments:
This hits on the issue of protection of consumers (clients) versus the protection of investors/banks. I find the power dynamic, also interesting, in this particular interaction between investor and client. The client typically knows less about the markets and investing than the investor does. Due to this power dynamic and imbalance, I see a need for protections to be put in place for the consumer. It will be interesting to see the possible implementation of this rule and the effects of it in the future.
The argument that brokers would abandon lower-income individuals if they had to comply with the proposed "fiduciary rule" shows that such clients are inherently at a disadvantage when it comes to matters like retirement planning; either they can receive less financial guidance or they can receive financial advice that may not be in their best interest. It seems likely that proposed regulations like these will continue to be delayed, overturned, or stymied in some form in the coming years as part of President Trump's desire for economic deregulation across the board.
It's interesting how this policy is estimated to save 4 billion dollars annually, which I am assuming is for consumers. I wonder what the loss is for those investing the retirement funds. I wonder what the overall welfare gain and loss with and without this Fiduciary Rule. Yes, it does seem like Trump will be doing everything he can to delay this.
i thought that this article was a really interesting read. like stated above i thought it was interesting to see if this passes then brokers would probably drop their smaller clients because they wouldn't really make the broker much money. if this is true what is to say that they really care about their smaller clients now? are they really giving these clients the best advise?
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