I was speaking to a Washington regulator the other day about how to best help retirement investors when the conversation eventually turned to the E*Trade ad campaign controversy. Don't get me wrong. We both loved the talking baby. Heck, it will forever be my daughter's favorite element in any Super Bowl commercial. No. This particular question dealt with the whole idea of whether E*Trade has crossed some Marquis of Queensberry line when it came to taking on the competition.
It's not like we're the only one talking about this. Financial professionals are livid (see "Finance Pros Sound Off on E*Trade Ad Controversy," FiduciaryNews.com, February 20, 2013) albeit for different reasons. Some feel E*Trade's claim that the discount broker charges lower fees is exaggerated. In fact, a look at E*Trade's fee schedule by Roger Wohlner in his blog ""E*Trade's Fee Commercials – Informative or Misleading?" (The Chicago Financial Planner, February 18, 2013) shows this quite clearly.
But the topic of my chat with the regulator focused on the "hidden fees" claim. While E*Trade appears to be indicting its competitors for charging "hidden fees," it does so in the face of collecting 12b-1 fees itself.
Recommended For You
I asked the regulator, "Do you think revenue sharing fees like 12b-1 fees are considered by most folks to be 'hidden' fees?" The answer was a quick "yes."
Now, unfortunately, this conversation was not on the official record, and I can't even tell you what area of government I was speaking with, but suffice it to say, the matter of 12b-1 fees is not a foreign issue.
We unfortunately agreed the typical investor will take E*Trade's ads at baby face value. They'll smile and believe everything they hear. Which reminds me of another conversation I had with another Washington regulator. He said when his first arrived at his job, he refused to believe people were dumb enough to actually believe they could get something for nothing when it comes to their retirement investments. But two years on the job has since convinced him otherwise. He's sorrowfully disappointed.
What scares me the most about the E*Trade ad campaign isn't the implication it charges lower fees. Nor is it the fact they collect revenue sharing fees like 12b-1.
The issue that most frightens me is the language they've chosen to make their pitch. As a fiduciary advocate, my ears are quite attuned to the right words to use when describing what sets a fiduciary apart from a broker. These words aren't easily recognizable by the general public, but they are words that evoke the honor, duty and loyalty of a fiduciary (without necessarily using the words "honor," "duty" or "loyalty.")
What I saw in especially the first few ads in this campaign was E*Trade using the very same evocative phraseology as a fiduciary would (but carefully avoiding the use of the "F" word). That E*Trades ad may have been connotatively incorrect does not make it denotatively incorrect. And that means, given its resources, E*Trade, a mere broker, is attempting to own the words of the fiduciary standard.
Right now, the meaning of "fiduciary standard" is a void waiting to be filled. Too many marketing books tell us the first to fill the void wins the day (and the market). E*Trade's opening salvo is an attempt to secure this strategic position in advance of any SEC or DOL ruling on the meaning of "fiduciary." For a befuddled public, it will come down to who will they believe: A regulator who makes a single pronouncement, or a deep-pocketed firm who can afford to repeated by air time for a coordinated ad campaign.
Ironically, Washington still thinks there's such a world where "too big to fail" is a valid philosophy.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
