The early days of the Trump administration have been action-packed, with everything from an alleged Russia connection to some of its staff to a tooth-and-nail battle over the future of the Affordable Care Act. Meanwhile, amid the 30-plus executive orders to date there are two, in particular, that have the potential to deal a sharp blow to American investors and the investment management industry.
The delay in the implementation of the Department of Labor's fiduciary rule and proposed scaled-back provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act raises questions about the commitment of the administration to protecting investors, although some professionals might see this as breaking a yoke that is holding back our industry. And perhaps there will be short-term gains, but at what cost?
None of us needs reminding of the 2008 global financial crisis and its aftermath. But after years of hard work rebuilding trust in the financial services industry and in its willingness to put its house in order, the global economy is mostly back on track.
However, by threatening to rescind the DOL fiduciary rule, the Trump administration is telling investors that financial advisers' commissions and the firms' profits are more important than investors' retirement nest eggs. The optics certainly are not good. The order signals that fiduciary responsibilities are fluid, when, in fact, our commitment to every client's best interests should be set in stone.
To put the industry's trust problem in perspective, a study of CFA charterholders and other investment professionals published this month by CFA Institute, “The Future State of the Investment Profession,” found 67% of respondents in North America believe the sale of inappropriate products to clients is commonplace. Moreover, we found that one in four wealthy individuals choose not to take wealth management advice, in part because they do not believe advisers act in their best interests. Perhaps one of the most damning findings was that nearly one half of respondents questioned the value delivered in return for asset management fees. This is our own profession's view of the value we are providing!
So, do we really want to turn back the clock? Or are we prepared to do what is right to maintain our clients' trust?