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Why Wall Street's DOL killer threat -- that 'millions' of IRA investors will go unadvised under new rules -- is hogwash

Investors already have options and Wall Street's withdrawal, already in progress, can only improve investor outcomes

Author Guest Columnist Ron Rhoades June 8, 2015 at 10:29 PM
no description available
Ron Rhoades: I say let these firms so depart the marketplace! There are many, many investment advisory firms willing to provide trusted advice for reasonable fees.

RIA Compliance

Stephen Winks

Stephen Winks

June 8, 2015 — 11:28 PM

If only the entire industry could be retooled in the best interest of the investing public in support of fiduciary duty of the brokers. Professional standing of the broker would be essential if one is to be in business. The industry would restore the trust and confidence of the investing public . The important lessons learned by advisors over the years in competing with brokers are no longer secrets. The brokerage lobby’s false narrative is self defeating and accelerates the defections of brokers to advisory services and the best interests of the investing public.

You have to feel sorry for brokers who have no control over their value proposition, cost structure, margins and professional standing.

Stephen Winks



June 9, 2015 — 3:24 PM

Brooke, the most insightful aspect of this article is your note at the beginning. People on both sides do talk past each other and that is unfortunate.

As far as the rest of the article goes, Rhoades is far too confident in his rebuttal of his opponents’ “fallacious” arguments.

First off, the fact that a small number of existing firms are providing services to investors with small IRAs (which I think is great, for the record) DOES NOT suggest that these firms could or would meet the needs of the market currently served by traditional broker/dealers. This reasoning is so horrid that it would be comical if not for the large number of people who find it convincing. An intelligent exploitation of this topic should consider potential differences in business models (particularly from a behavioral finance standpoint) which could prevent alternative service providers from reaching the same market as traditional broker/dealers. There are many important differences, but one of the most crucial seems to be the concept Michael Kitces refers to as fee saliency. Some clients who are willing to pay 5.75% front-end loads may not have the means or the desire to write a check for $500 to an hourly planner. I’m all for transparency (and I fear that some existing “disclosure” regulations obfuscate more than bring transparency), but it may be the case that some clients are more willing to pay a transaction fee than write a check (even if this mental accounting seems irrational). There are many other important considerations (such as geographical proximity, relational proximity, consumer familiarity, marketing methods and expenditures, etc.) when comparing the companies championed by Rhoades to traditional broker/dealers, but the key point here is that there are far too many differences to reach his sweeping conclusion.



June 9, 2015 — 3:29 PM

Pardon my typo: ...intelligent exploration of this topic…

Teresa Vollenweider

Teresa Vollenweider

June 9, 2015 — 4:32 PM

Ron, what is SIFMA’s and FSI’s definition of personalized investment advice? Are they claiming that that what brokers provide?

Robb Smith

Robb Smith

June 9, 2015 — 10:01 PM

Once again, Mr. Rhodes’ comments go the way of his recent rants on global warming (oh, that’s right, it’s called climate change now because GW has been proven unfounded) – incredibly naïve. Many of us opposed to the current DOL version are as much or more dedicated to a fiduciary world than even Mr. Rhodes espouses to be. We work daily in the trenches (in my case, as an independent fiduciary consultant to workplace fiduciaries) and understand what will and what won’t bring meaningful change to retirement plans. THE DOL FIDUCIARY RULE WILL DO LITTLE TO POSITIVELY CHANGE PARTICIPANT RETIREMENT INCOME SECURITY.

It’s ironic that Mr. Rhodes hales from the halls of academia but fails to ever mention the one thing that would make a sea change of difference for plan participants – WORKPLACE FIDUCIARY TRAINING AND CERTIFICATION. The DOL, White House and POTUS suffer from the same shortsightedness. And, Isn’t it also ironic that we are expending all this time and energy trying to pin the title of fiduciary on plan investment ‘advisors’ but, all the while, tens of thousands of our country’s frontline, workplace fiduciaries – those who have total and final authority and discretion over trillions of dollars of plan participant assets – are not required to have a single hour of formal training or ongoing certification on fiduciary best practices.

Having trained numerous workplace fiduciaries over the years – with only 4 to 8 hours of comprehensive training – I have seen firsthand that properly trained workplace fiduciaries are far better equipped to develop and implement fiduciary best practices and improve the operation of their plan – than any advisor’s fiduciary “standard” could possibly hope to accomplish.

It has been my mission for more than a half dozen years to bring awareness of this critical issue to the forefront. Until we change the conversation we will continue to see less than stellar retirement income security results for the workforce of this country.

Stephen Winks

Stephen Winks

June 10, 2015 — 3:45 PM

Robb Smith,

There are innovations beyond your personal reach that can only be achieved by a clear understanding of ongoing fiduciary duty entailing accountability and responsibility for every recommendation ever made by an advisor. Surely you are not suggesting that these innovations be dispensed with which make the plan sponsor compliant with their fiduciary duties. These innovations are only possible when the free market sees opportunity for improvement—thus the value of Ron Rhoades good work in advancing awareness.

You are to be applauded for your good work with plan sponsors, but others like Ron Rhoades are doing good work as well. No need for disparagement. Its going to be a long haul up hill before the industry is prepared to support the best interest of the investing public, even if the industry actually decides to support brokers in acting in the best interest of the investing public, as required by statute.

Stephen Winks

Robb Smith

Robb Smith

June 11, 2015 — 10:23 PM


Thank you for your comments and I apologize for not clearly stating my point. Although we agree that a “strong” fiduciary standard is a noble cause it will do little – from the standpoint of qualified retirement plans – to alter the positive outcomes for plan participants. In a recent blog, I laid out the top five issues that the DOL should address to actually move the needle in a positive direction for plan participants. The fiduciary standard was not one of the top five. By far and away the most important issue is required training for ALL plan fiduciaries, as I succinctly addressed in previous post. Obviously, you don’t agree or you would have stated as such in your response. So, we will disagree on what is most important for long-term participant retirement income success.

Btw, I find your comment that “innovations are beyond your personal reach” to be slightly condescending. If you would like to have a greater understanding of my level of knowledge and innovation in the retirement plans arena you would be well-advised to attend one of my workplace fiduciary training workshops. Or contact me privately and you can bring me up to speed on all the latest plan fiduciary innovations that are beyond my reach.

Ryan Noory, Esq.

Ryan Noory, Esq.

June 18, 2015 — 6:24 PM

Intriguing post. — Thanks, Ryan

Old Gray Mare

Old Gray Mare

August 4, 2015 — 2:35 AM

Just so I’m clear about this…

“the broker charges a 5.75% upfront commission. In addition to the $575 up-front commission on a $10,000 account, ongoing 12(b)-1 fees are also typically paid to the brokerage firm, usually in the amount of 0.25% a year.” Hmmm…$575 one time + $25/year = $600 in year 1 and about $25/year ongoing. The client gets to call the broker as often as he wants…for no fee. And this is bad, according to Mr. Rhoades, because it is too expensive.


“(Ben Wacek) offers ongoing financial and investment advice through a monthly retainer that starts at only $50 per month.” 12 months/year X $50 = $600/year…every year. And this is good, according to Mr. Rhoades, because it is, umm, cheaper?

Apparently, Mr. Rhoades is a better lawyer than financial advisor. Let me re-phrase that. It appears that Mr. Rhoades is no better as a lawyer than as a financial advisor. His argument is hogwash and his math is worthy of the Congressional Budget Office.

I’m work in a fee-only RIA firm. I spent over 20 years as a registered rep AND investment advisor representative at a B/D that also had an RIA. The RIA model ISN’T FOR EVERY CLIENT, no matter how much Mr. Rhoades wants it to be.

The new Dept of Labor regulation oversteps its boundaries, because it has NOTHING TO DO WITH LABOR. The change in regulations should come from the SEC and/or FINRA, not the government body that is charged with “preparing the American workforce for new and better jobs, and ensuring the adequacy of America’s workplaces.” (...which I pulled straight from the DOL website.)

I say, let the client decide what works best for him or herself and stop trying to stomp out personal freedom in the name of equality or global warming or social justice or equal wages or whateverthehell the liberals are trying to save us from this week.

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Mentioned in this article:

National Association of Personal Finance Advisors
Top Executive: Geof Brown, CAE

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Top Executive: Andy Rachleff

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