Tuesday, January 25, 2011
All over but the shout'in?
I was born and raised on the west coast up and down I-5 from San Diego to Seattle and points in between. So when I came to Texas in the early 90’s, it really was somewhat of a culture shock. Out west, we ski in winter and surf in the summer. Down here in Texas, it’s hunting and golfing, two pastimes in which I have developed little interest or skill. One thing about the culture in Texas I’ve come to appreciate, besides Tex-Mex and the prevailing view of football as religion, is the use of sayings to make a point. I catch myself saying “Howdy” and “Y’all” and have even offended some women in New York by calling them “Ma’am”. Apparently the female folk in the Northeast don’t appreciate the attempt at being polite. Texas sayings I’ve recently heard; “This ain’t his first rodeo”-experienced, “He’s so broke, he can’t pay attention”-poor, “He’s one taco short of a combination plate”-crazy, He’s all hat and no cattle”-boastful “He ate supper before saying grace”-immoral “He looks like he was in the outhouse when the lightning struck”-ugly “If dumb were dirt, he’d cover about an acre”-stupid. I could go on but I think you get the drift…besides, you’re smart enough to know come here from sic’em!
Anyway, what brought to mind Texas sayings was seeing the final SEC study on the fiduciary standard. After reading it and looking at some industry reactions, another saying came to mind; “It’s all over but the shout’in” This saying has several meanings, one being that it’s all pretty much a done deal. But my thoughts were a bit different. While it’s great to finally have the SEC study done, it’s far from a done deal, particularly when 2 of the 5 commissioners write a dissenting opinion just after the study was released. The shout’in is not over and may have just intensified.
Those for the fiduciary standard are pressing to get it enacted ASAP knowing that time tends to blur the facts. But those whose business models are threatened by change will press on with delay tactics hoping the landscape will change in time. To me, that’s kinda like “whistling through a graveyard”, but it’s all they‘ve got. How can you argue against placing your clients’ interests first? One of the most lame arguments is that the products will become too expensive and less available to lower income people. Really? Newsflash….that has already happened. And in the few markets where the products are available to lower income folks is where you’ll find complex, high commission, relatively unregulated indexed annuities being peddled as the solution for every need…something that should be driven out of the system anyway.
What I hope and believe will happen is that the product driven, one size fits all amateurs will be weeded out of the business giving rise and opportunity to the true professionals. This has nothing to do with commission based pros versus those who are fee based. Some of the most professional advisors in the business happen to be compensated by commissions for their work. The difference is that the true pros disclose their compensation while the amateurs hide it. For those worthy of their services, compensation disclosure has never been a factor. In fact, I’ve known some who after disclosing compensation on a case well into six figures, their clients were concerned about whether or not they were paid enough for their work.
As the turf protecting continues, I’m heartened that it appears the regulators are attempting to do the right thing in the face of a great deal of special interest pushback. All of us who give personalized financial advice should be held to a standard that places the clients interests first. And we should all be held to that standard by self-policing via a single SRO, namely FINRA. I realize that for the fee based advisor or commission based broker, this kind of change is “as welcome as a skunk at a lawn party”. In this case, it appears that “lettin the cat outta the bag is a whole lot easier than putt’in it back in”. Translation: You can’t stop progress.