Juggling Dynamite

Happy Monday!

Another week, same old self-serving, conflicted foundations supporting the investment advice business.  See Most CFPs are brokers. Fiduciary advocates say that’s a problem: No, really? Who would have thought?!

As the CFP Board prepares to release a new set of standards of conduct for planners, investor advocates are calling for last-minute changes to strengthen the fiduciary responsibilities associated with the certification.

The board’s proposed standards don’t go far enough to address conflicts of interest and must also tackle advisors’ compensation arrangements, says Knut Rostad, president of the Institute for the Fiduciary Standard. Rostad said he would like to see the CFP Board’s fiduciary standard follow in the spirit of the Department of Labor’s rule and the fiduciary responsibilities that grew out of the Investment Advisers Act.

…”Here’s the rub: CFPs [CFA’s too!] mostly work in brokerage sales where these things are hard, or, frankly plain impossible,” Rostad said.

“Without guidance … brokers rely on industry training, culture and experience,” he added. “BDs live by suitability rules, and these are the home field to hidden conflicts.”

Rostad and his allies are also pressing the board to take a firmer stance on conflicts, urging elimination and mitigation over disclosure. They would also like to see language requiring transparency and clarity on conflicts and fees.

…Kahler finds the marketing campaign branding CFPs [CFA’s and other financial ‘advisors’] as trusted advisors particularly troubling. That promotional effort has been a bad-faith exercise representing all CFP holders as adherents to the highest code of ethics when the board’s own standards of conduct fall well short of that mark, he argues.

“At best I think our campaign has been misleading,” he says. “At worst I think it may border on being fraudulent.”

Bottom line: the financial sales side spends hundreds of millions a year on sponsorship, lobbying regulators and promotional materials that pull on the public’s heart strings with laudable ideas like planning for the future and looking after our loved ones.  All the while resisting and trampling on fiduciary standards that require their ‘advisers’ to put the best interests of trusting customers ahead of maximizing their own fees and commissions.
In doing so, they are committing fraud and causing great public harm.

We must demand that sales is separated from advising in finance. We need a return to Glass-Stegall-syle divisions. Yes we can. We have to.

Danielle was a guest with Jim Goddard on Talk Digital Network, talking about recent developments in the world economy and markets.   You can listen to an audio clip of the segment here.

Less oversight and capital requirements increase short term bank leverage and profits at the cost of longer term financial stability and taxpayer underwriting.

2006: This CEO says it’s safe to deregulate his big bank.
2008: He’s proven wrong when his bank gets $1.4B taxpayer bailout.
2017: He’s back lobbying Congress to deregulate again.
This week: A bunch of Senators side with him over taxpayers by voting for the #BankLobbyistAct. pic.twitter.com/UmcYLgf2DZ

— Elizabeth Warren (@SenWarren) March 8, 2018

Also see Reversal of Wall Street regulations risks another financial crisis:

“It is grossly irresponsible at this late very stage of the business cycle, to add legislative deregulation of the biggest banks in the country to widespread regulatory agency deregulation and non-enforcement,” [Better Markets President, Dennis] Kelleher said. “Unleashing the biggest banks is just asking for another horrific crash.”

The bills proponents, which include 13 Democrats, argue that the Dodd-Frank rules went too far and became overly cumbersome for all but the biggest Wall Street banks. Their strong financial performance, Kelleher says, suggests otherwise.

“Every single argument for deregulation has been objectively rebutted by rising if not historic bank revenues, profits, bonuses and lending,” he said.