When Congress passed the Wall Street Reform and ConsumerProtection Act (aka “Dodd-Frank”) in the summer of 2010, it neitherreformed Wall Street nor protected consumers. Indeed, it did worse.It institutionalized “too big to fail,” thus, removing allaccountability from large Wall Street firms by protecting them, nottheir customers. It has since become a Rorschach test to determinewhether you're more of a politician (you believe the rhetoric ofDodd-Frank) or a mathematician (you can see through that rhetoricand into the underlying reality of just what Dodd-Frank hasdone).
It appears likely we may soon be saying the same thing about theDOL's new “conflict of interest” (aka fiduciary) rule. It neitherremoves conflicts of interest, nor does it stay true to the meaningof fiduciary.
First, the idea of eliminating conflict of interest fees is anhonorable cause. In short, these fees include the three mostconspicuous atrocities of commissions, 12b-1fees, and revenuesharing. While all fees are suitable (and important) for thebrokerage industry (where an agency relationship exists), they areundeniably inappropriate for the adviser industry (where afiduciary relationship exists). To argue otherwise would requireyou to ignore the centuries of trust law and case law wherebyfiduciaries must never engage in self-dealing transactions.
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