Start the conversation
Leave a Reply
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…
Join the conversation. Click here to jump to comments…
About the Author
Shah Gilani is the Event Trading Specialist for Money Map Press. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains.Shah is also the proud founding editor of The Money Zone, where after eight years of development and 11 years of backtesting he has found the edge over stocks, giving his members the opportunity to rake in potential double, triple, or even quadruple-digit profits weekly with just a few quick steps. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.