Opinion: gambling with deregulation damages the average investor
The Trump government appears intent on repealing Obama-era regulation no matter the actual cost to individuals
The Trump administration has pretty much unpicked anything and everything that was passed into law by former President Barack Obama. The slow unpicking of the Dodd-Frank Act is a perfect example. It seems that while agenda is paramount, consumer protection may not be.
Regardless of the extent that any given legislation is fulfilling its originally intended effects of protecting the average investor or retail saver, the current government appears intent on repealing no matter the actual cost.
The vote last week in the fifth circuit Court of Appeals in New Orleans to vacate the Department of Labor's much maligned fiduciary standard rule goes a significant way towards showing that half of the voting population is woefully wrong about the intentions of the party it so wholeheartedly supports. Presiding judges on the court ruled by a two-to-one majority to cast aside the rule, based largely on arguments presented by the US Chamber of Commerce and the Securities Industries and Financial Markets Association (Sifma).
The fiduciary standards rule loosely demands that retirement advisors act in the best interests of their clients and put their clients' interests above their own. As someone who hopes to one day retire and puts aside monthly installments to that end, having an adviser who acts in my interest really just seems like something of a no brainer. Of course, it isn't that simple – the rule is far from liked.
Sifma, for example, is dead set against the rule and last week released a statement saying that 'the court has ruled on the side of America's retirement savers, preserving access to affordable financial advice,' while long term adversary and Republican US representative for Missouri, Ann Wagner, said that the rule was 'an ill-advised, top-down assault on local financial advisers and broker-dealers'.
While the decision by the fifth circuit is by no means final, it is a hammer blow to a rule that was already backed up against the ropes. It is a decision that seems not to be based on consumer protection but out of hostility towards the rule and the agency that enforces it. The Securities and Exchange Commission (SEC) has loudly suggesting for several months that it intends to release its own version of the rule that applies to the entire advisory industry and not just the retirement sector, a measure that has been widely supported.
It seems likely that following this decision the SEC will be allowed a mandate to dilute the protection it offers in its version of the rule, following the agenda set by the Trump administration, and to offer the lowest level of support possible while appeasing the broker dealer community that is most likely to see substantial gains.
To return to my initial point, there is a fundamental discrepancy between voters' expectations of investor protection, and moves to shelve a rule that prevents people from being ripped off.
The court decision appears to be a sharp rebuke to the rule of law, and a huge setback for the common sense principles that retirement investors in the US should be given investment advice that is in their best interest. Why average people continue to support anyone that promotes this is counterintuitive and irrational.