Implementation of a law requiring investment advisers to act as fiduciaries for certain clients was set to take effect this month, but has been postponed until July 1, 2019. I have zero confidence it will ever happen.
The Department of Labor wants to require investment advisers who work for IRAs and 401(k)s to place clients’ interests before their own. If you want details, search “financial adviser fiduciary responsibility.” Add my name to the search term to read some things I’ve written about the subject over the years.
The issue should be akin to passing legislation preventing the beating of puppies, but only in Washington (and Nashville) will you find people who favor beating puppies simply because someone else is against it.
Legislators in Nevada last year took matters into their own hands, passing a law requiring all financial advisers to act in the best interests of their clients.
Tennessee should follow suit and enact similar legislation.
I’ve pitched the idea to members of Congress, members of the Tennessee General Assembly and the Tennessee Attorney General’s office. Here are some of their arguments against the idea:
“This would be more government intervention. I’m for smaller government.” If you believe smaller government is a legitimate reason to oppose minimum financial consumer protection, there is no need for the Tennessee Department of Commerce and Insurance to even exist.
“If states pass their own laws for advisers, we will end up with a complex patchwork of 50 different requirements.” Okay, Mr. Lawmaker; then don’t come back to me on some other issue preaching “states’ rights.”
“A fiduciary requirement would force advisers to stop serving small investors.” If your adviser stops working for you because he is required to put your interests ahead of his, you are better off without his “help.”
“A lot of my constituents in the financial industry tell me this would put them out of business.” Good. Anyone whose business model depends on the government protecting their right to charge complex, exorbitant fees should be out of business.
“Until you, I haven’t heard from anyone in favor of this.” That’s because the people who depend on government protection of their professional pilfering are well-organized and vocal. The people who unknowingly pay too much in fees don’t have a lobbyist or trade group. And most of them don’t have a clue they are being overcharged.
“Government can’t protect people from making poor decisions or hiring unscrupulous service providers.” Then let’s get rid of the Tennessee Board of Medical Examiners. (Thankfully, doctors don’t generally oppose acting in their patients’ interests.)
Tennessee should join Nevada in leading the rest of the country on this issue. If you agree, consider sharing this column with your favorite legislator, regulator or governor. Just add a note suggesting that Tennessee enact legislation protecting the state’s individual investors. Here are some email addresses:
Tennessee General Assembly, selected Senators
Dr. Richard Briggs, Tennessee Senate member: email@example.com
Becky Massey, Tennessee Senate member: firstname.lastname@example.org
Frank Nicely, Tennessee Senate member: email@example.com
Tennessee General Assembly, selected House members
Harry Brooks, Tennessee House member: firstname.lastname@example.org
Martin Daniel, Tennessee House member: email@example.com
Bill Dunn, Tennessee House member: firstname.lastname@example.org
Tennessee Department of Commerce and Insurance, Securities Division: 615-741-2947 (We have been told that any state effort should begin here. If you can find an email address for anyone who works here, please send it to us.)
Scott Jackson, Tennessee of Commerce and Insurance Financial Division head, Tennessee Attorney General’s office: email@example.com
Tennessee Attorney General Herb Slatery: Herbert.Slatery@ag.tn.gov
Members of the Tennessee House subcommittee on Insurance and banking: http://www.capitol.tn.gov/house/committees/sub-insurance.html