PrefBlog

There’s a great piece in the WSJ about the practical effects of the fiduciary rule:

Judith Friedlander, an 80-year-old retiree from Murrieta, Calif., doesn’t appreciate the government trying to regulate how she manages her roughly $400,000 individual retirement account.

After the Labor Department last year approved the fiduciary rule, which generally requires advice on retirement assets to be conflict-free, Ms. Friedlander says her financial adviser suggested she transition from a commission-based account of the sort that could run afoul of the rule into a fee-only account.

But Ms. Friedlander isn’t interested in a switch. She trades only a few times a year and says moving to a fee-only account that charges a percentage of her assets would be far pricier than the periodic commissions she currently pays. “I don’t see any advantage to the regulation for someone like me,” says Ms Friedlander, who adds that she hasn’t decided what to do.
…
As brokerage firms over the past several months have announced their compliance plans, some approaches have put new limits on IRA investors. Bank of America Corp.’s Merrill Lynch, for example, has said it will no longer offer individual retirement accounts that charge commissions, and will instead favor charging retirement savers a fee based on a percentage of their assets. J.P. Morgan Chase is taking a similar tack, offering brokerage retirement clients only a fee-based IRA.

Of course, fee-based accounts in a sell-side brokerage is a whole nuther can of worms. New issue commissions, proxy solicitation fees … the potential for conflict is endless. I continue to advocate that buy-side and sell-side be strictly separated, with the former charging account fees and the latter charging commissions; that anybody on the buy-side be required to publish a performance history from inception that is subject to audit and in which any defined groups be strictly mapped onto the fiduciary’s contemporary KYC form; and that only one ‘side’ can be owned by a single entity (e.g., brokerages and advisory firms can’t have a common owner).

This entry was posted on Thursday, February 16th, 2017 at 12:08 am and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.