Start the conversation
Comment on This Story
Or to contact Money Morning Customer Service, click here.
I admit it, sometimes I get worked up.
Especially when it seems that unsuspecting investors, retirees, and anybody else who's trying to navigate the capital markets in pursuit of the American Dream is about to get fleeced - again - by Wall Street.
A perfect example: Getting all worked up over Wall Street's attempts to kill the Labor Department's fiduciary rule, which is supposed to go into effect this April.
But you can't let this stuff get to you. Because Wall Street is always trying to find the next end-around that will allow them to skirt the most expensive regulations.
It's better to try and come up with simple, common-sense solutions to stop the Street from squirming through whatever loopholes they can find.
Well, I found one. And it would save us all a lot of hypertension and sleepless nights.
Here's what should replace the fiduciary rule...
The Rule Isn't Perfect - but It's Better Than Nothing
I'll admit - as I've done before - that the fiduciary rule isn't perfect.
Despite the more than 1,000 pages the rule takes to essentially say that brokers need to put their clients' interests ahead of their own, it's a prudent approach to a confusing issue.
That issue amounts to the difference between brokers and investment advisors.
They are held to different "standards" when it comes to their clients.
Brokers have to put their clients into "suitable" investments, or trades, or products, while investment advisors have a fiduciary duty to put their client's interests ahead of their own pecuniary interests.
But President Donald Trump signed an executive order in early February delaying the implementation of the fiduciary rule. The president's deregulatory army has a good mind to kill it once and for all - for the good of the public (supposedly) and for the good of Wall Street (for sure).
I've written here about how the fiduciary rule makes perfect sense and why killing it is flat-out wrong.
Fortunately, I found a simple solution to me getting worked up over the rule getting waylaid and Wall Street getting around prudent, if not insanely longwinded, regulations meant to protect the innocent...
An Easy Fix
It's a simple disclaimer written by a smart securities attorney - Harvard undergrad and NYU Law kind of smart - that I discovered on the irreverent and often hilarious securities industry blog, BrokeAndBroker.com.
Aegis J. Frumento, co-head of the Financial Markets Practice at Stern Tannenbaum & Bell, and a former managing director at Citigroup and Morgan Stanley, says in BrokeAndBroker:
Fiduciary duties should be imposed only on true investment advisers who are willing to be held to somewhat professional standards. Instead of trying to impose ill-fitting fiduciary duties on brokers, we should force brokers to tell customers the truth about what they do, so that customers can fairly know and be held to the limited remedies they should have against them.
To me that's the entire issue. There is a difference between brokers and…
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.
