By Bill Broich
Have you ever wondered why some people are more educated than others? How is it that some are naturally more financially alert than others? We as agents are soon to be faced with this dilemma; do we educate and convince others about the benefits of annuities or do keep quiet for fear of abusing insurance laws?
It could seem odd to even have to address this issue, but unfortunately, because of government overbearing in our industry, that day could come sooner than we think. Financial literacy comes with a price, the price of exposure to regulatory governance. Imagine a situation where you explain how an annuity works and how it could benefit the prospect and at the same time have your license to be an agent at risk. Risk of losing your ability to earn a living.
Those who support the new issue of fiduciary responsibility are wide and varied. From President Obama to AARP they are bound and determined to make these rules the law. One has to wonder why, why would there be such a need for this level of control. What is to be gained from this level of government? Certainly common sense would state that we as advisors don’t work for charity, we work for income that sustains us, our families and our business. By exerting “silly” rules about what we advise can only dictate a level of incompetence from any advisor simply from the fact that advice will only be given by those frozen by fear.
Now the new test for fiduciary responsibility is being dictated by government bureaucrats whose only possible reason for existence is to further their own position. Now add in the White House, the Department of Labor, the SEC and our world is nearly complete, complete with rules and jurisdictions that no one with any level of common sense can understand.
On the surface the idea of fiduciary responsibility might make sense. But a closer examination would only reveal that the reason for this is simply to further their own careers and to make the world of business more and more difficult.
So how do we separate fiducial literacy and fiducial responsibility? Where is the line drawn? As advisors we only assume that we are acting in the best interest of the prospect, when in reality that advice could be considered financial irresponsibility. So how does the prospect know? Who is the prospect supposed to listen to? If the public already believes all advisors operate under a fiduciary standard, does regulators making it so even matter? What, then, does this tell you of the primacy of the fiduciary standard vs. financial literacy?
The obvious question is who benefits? Does the advisor make commissions at the loss of value to the prospect or does the prospect find the road to advice is self-directed. Is the prospect on his own, who actually is responsible?
How would the regulators see as example of successful performance made in a client’s account if the advisor also gained financially? Who draws the line between professionalism and over regulation? To me it is simple, the more regulation we have means the less freedom to act as professionals and this of course means a loss with the prospects that actually need help. How about the employee who works at an everyday job and has no actually investment experience and only wants to see a future financially? Does that mean that he would suffer simply because there is no one with enough courage based on fear of government to actually suggest a workable plan?
Year ago the government decided that wine sold in America should be labeled as dangerous for consumption by pregnant women. And of course those who operates heavy machinery? Did that warning actually really ever benefit anyone? My guess is no. Now the same bureaucratic attitude is trying to invade our industry simply on the basis of advice can only be neutral? Really! Ever buy a TV at Best Buy? How about looking for a product on Amazon, are we or are we not always completely chased by offers every time we boot up?
How about the moral approach to financial advice? Every time I suggest the use of an annuity am I placed in a moral position? How can I assure the prospect that I am only considering their best interests? Who actually is going to judge my recommendations? If this is allowed to become the law of the land, then every suggestion made by every advisor in America will have to face the “death’ squad. Where does this end and how can this be anything of value to the consuming public?
Of course the obvious answer is the ROBO computers who run off pre-set algorithms will be the actual choice for the government. Why? Simply because there is no human intervention in the process, it is entirely a computer making the decision and guess what computers don’t need health insurance or a pension. Look at the amount of money being delegated to this fight by the securities industry itself. Is it simply their position to create a level playing field or do they have a hidden agenda.
If the financial industry could sell all their products without ever having to write a commission check, guess who keeps the margins? So is congress going to also regulate computers and their pre-set advice?
In the end, the losers will be the consuming public, those folks who need and want advice. Who will the winners be? Easy, big Wall Street and those living off the bureaucratic trough.