Had Securities and Exchange Commission Chair Mary Jo White succeeded in passing a fiduciary standard rule, the Department of Labor’s fiduciary rule wouldlikely be less stringent.

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So says Mercer Bullard, law professor at the University ofMississippi Law School. In a candid interview with ThinkAdvisor,the investor watchdog provided a withering assessment of ChairWhite’s performance.

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Related: What is the fiduciary rule's future underTrump?

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For two decades, Bullard, a former SEC attorney, has been aninfluential shareholder voice on investing issues. He has testifiedmore than 20 times before Congress and led petition drivesresulting in heightened regulatory oversight.

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For the DOL’s rule, his input focused largely onpayment grids, in addition to advocating for the inclusion of fixedindexed annuities under the rule.

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He has served on the SEC’s Investment Advisory Committee and isfounder of Fund Democracy, a group advocating for mutual fundreform.

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A surprising item on his curriculum vitae is a seven-year stintat a financial planning firm, which ended in January of thisyear.

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ThinkAdvisor recently spoke by phone with Bullard, who discussedthe DOL rule, the Dodd-Frank Act, what Social Security is and isn’tand his idea for a standardized annuity to avert elder financialexploitation. Here are excerpts:

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How do you rate Securities and Exchange Commission chairMary Jo White’s job performance?

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She’s been such a bad SEC chair for investors that there isn’tmuch room to go backwards. She repeatedly made promises to getfiduciary rulemaking done, though failed to get it through theCommission. But that turned out to bite the industry because therule she would have done probably would have been a muchwatered-down version of the DOL’s fiduciary rule.

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Do you expect President-elect Donald J. Trump to ease orrepeal the DOL rule?

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That’s certainly on the table. His circle of advisors seems tobe consistent with wanting to repeal it. He clearly has theauthority to effectively repeal it.

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Many financial advisors will be happy if the DOL rule isrepealed. Ultimately, though, the fiduciary rule stands to benefitclients. Shouldn’t FAs be thinking about that?

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They’re thinking about their bottom line.

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Are you a Democrat?

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I’m an independent, and I agree with Republicans on a lot ofissues. But I don’t advocate on those issues because the industrycan certainly accomplish that.

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In an interview with me for Research Magazine in 2003,you said that “The Securities Industry Association [now SecuritiesIndustry and Financial Markets Association (SIFMA)] is well knownfor attacking anything that smells of investor protection.” Stillthink so?

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That’s certainly true and has been proven many times over inconnection with the DOL rulemaking. I have never seen a lobbyingcampaign characterized by so many outright lies in the financialservices arena as I saw in connection with the DOL rulemaking.

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Mr. Trump repeatedly said, when campaigning, that hewould repeal the Dodd-Frank Act. Do you expect that willhappen?

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It would require statutory amendments, which means the Senatewould have to go along. So, depending on whether a filibustersurvives, it would be hard to get major changes to it or anythingelse that [needs] Senate approval.

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What do you think will happen with the ConsumerFinancial Protection Bureau now that Mr. Trump will have directoversight of it?

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The virtual absence of customer protection by banking regulatorswas long an obscene omission in the law. It’s really unfortunatethat the CFPB may be under fire.

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Consumer protection doesn’t seem to be a priority forthe president-elect.

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It’s hard to predict what he’s going to do because there’s apopulist angle that includes a bit of anti-Wall Street sentiment,which suggests that he would support investor protection. On theother hand, [his] insider appointments are generallyanti-regulation, which would suggest that he would be [aswell].

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How will the DOL rule chiefly affect financial servicesfirms?

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The problem for firms that have brokers who are more susceptibleto financial conflicts is that the rule will reduce their revenues.The firms that haven’t relied on sales motivated by differentialcompensation will do better in the new DOL environment.

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How will the rule affect FAs’ commissions?

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Within the category of mutual funds, for instance, the advisor’scommissions will be flattened, but the firm’s compensation doesn’thave to be. And that’s one of the gross misrepresentations that theindustry has made about the rule. It argues that it would preventthe payment of commissions. In fact, not only does it allow paymentof commissions, it allows firms to continue to get exactly the samedifferential compensation they’ve been getting, as long as there’sseparation between the firm and its revenues and the compensationits advisors receive.

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As a contributor to the book “ExploringAdvice,” by PiEtech president Kevin Knull, you wrote that “onlya fiduciary standard can provide an effective counter todifferential compensation … and to financial incentives thatencourage advice … driven by the advisor’s self-interest.” What aresome of the most significant differentials?

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The multiples of compensation advisors get for selling a stockfund over a short-term bond fund, for example. Typically a stockfund pays a commission that’s three or more times as much as thecommission on a short-term bond fund. So advisors have an enormousfinancial incentive to recommend a higher allocation of stock fundsbecause it will substantially increase their compensation.

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You wrote too that “The fiduciary standard goes to anadvisor’s standard of conduct, whereas financial advice goes to thequality of the advisor’s services” but that these are “closelyrelated.” Please explain.

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One element of giving good advice is ensuring that it’s notconflicted. Some of the compensation conflicts are so extreme thatit’s hard to believe advice given in certain circumstances is notpainted by the advisors’ financial incentives. For example, it’shard to argue that it’s suitable advice when the advice to investin a stock fund is given in the shadow of a multiplier with respectto the compensation received.

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What else do you think Chair White failed at but whichneeded to be done?

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It’s a no-brainer that there are fundamental structural flaws inETFs that are a threat to the industry. But she has simply notaddressed them.

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You wrote that an effective financial plan matches theliquidity of a client’s assets with the client’s potentialliquidity needs. Don’t most plans do that?

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Financial plans that include variable annuities frequently donot, and that’s been the way in which variable annuities have beenmost abused. That is, selling annuities to those who have liquidityneeds that are inconsistent with what, essentially, should betreated as illiquid investments.

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Is there a place for fixed annuities in a retirementportfolio?

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Fixed annuities are what defined benefit plans are based on, andthere are still many employees who have a fixed-annuity retirementplan without knowing it. A fixed annuity should be thought of as acomponent of your retirement plan that provides for a very highlevel of certainty that you’ll have some minimum level of income inretirement.

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Indeed, you wrote that a fixed income stream provided byan annuity can minimize underperformance risk with both active andpassive management.

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Yes. And in some ways, fixed annuities are the opposite ofvariable annuities in the way they’re sold, not just in the waytheir returns vary.

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Social Security is a fixed annuity, correct? Many peopledepend on it for guaranteed income in retirement.

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Social Security should not even be discussed in the same breathwith “annuity” or “retirement plan.” Social Security paymentsrepresent only the continuing decision by a current Congress totransfer wealth to retirees. The idea that it represents some kindof claim on a trust in any sense other than politically is simplyincorrect. However, political promises are very hard to break.

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But what about the fact that the Social Security trustfund is running dry and is projected to last only till 2034? Mr.Trump, thus far, has no plan for Social Security reform.The trust fund isn’t the issue. When it runs out isn’t going tohave much bearing on whether people get [benefits] because SocialSecurity is a current redistribution of wealth, not a promise bythe government that when you start Social Security, you’ll get itfor the rest of your life.

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So, then, the trust fund isn’t thatimportant?

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The other reason the trust fund doesn’t matter is that you cansimply shift other revenues to Social Security, and that’spotentially what we’re doing now. The trust fund doesn’t representa pool of money like a 401(k), to which I or a group of SocialSecurity recipients have a contractual right. The trust fundrepresents a U.S. obligation. But Social Security is always goingto be strictly and solely a function of Congress’s decision in anygiven year to say that this is the Social Security benefit you willreceive.

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Do you expect Social Security payments to be reduced nowthat we’ll have a Republican Congress?

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The way they would cut it would be to increase the cost ofMedicare [premiums recipients pay]. All you do is take [out ofSocial Security benefits] a much bigger piece to pay for Medicare.That will be a much easier way to cut Social Security than toreduce the calculations of benefits.

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So how should FAs advise clients regarding SocialSecurity?

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Determine what the potential room is for breaking the impliedpromise about Social Security and how [clients] can factor thatinto their retirement spending based on their age.

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You point to substantial empirical evidence showing thatthe “greatest threat of elder exploitation” is from people theelderly know, including close relatives. What can bedone?

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We need to take the model for reporting child abuse and overlayit on elder abuse. We need to take steps to turn what arepermissive rules about protecting the elderly from abuses byrelatives into obligations on the part of financial professionals,medical professionals and others who are fiduciaries acting in thebest interest of their clients [and patients].

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Any other approach that you suggest?

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We could adopt standardized models for structural low-riskinvestment mechanisms so that investors could at least know that ifthey buy a certain version of a product, it’s the one that the SEChas identified to have a very low abuse risk.

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Such as?

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A fixed annuity, very transparent and without bells andwhistles. You’d call it “the Simple Annuity,” which kicks in,maybe, after age 80. This would be easy for people to identify andbuy, and would be the best protection against abuse.

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What are the chances of that beingintroduced?

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The SEC’s philosophy has to change. The DOL could have takenthis approach but decided not to.

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While conducting your advocacy work, you joinedPlancorp, a St. Louis-based financial planning firm, onboard from2009-2016. What prompted that?

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It was a good experience for me to be part of an organizationthat’s the subject of regulation and to get a better sense of howadvisors work. It was a tiny piece of compensation. I helped themout with regulatory issues and strategic planning and was the pointof contact [in Mississippi] for a handful of clients. But itwas never as good a fit as I would have liked.

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Are you satisfied with what you’ve accomplished as apro-investor advocate?

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I’ve been able to make a lot more law than I ever imagined Icould. But my advocacy career has been increasingly constrained bypartisanship in Washington. There’s been a pretty steady decline inthe civility and rational nature of the debate.

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You’re not giving up advocating, are you?

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I’m thinking about where to have an effect, not so much bymaking persuasive arguments but perhaps by gathering andanalyzing data that speaks more directly to investor issues. So I’mworking toward a doctorate in finance to be able do more of thekind of sophisticated quantitative analysis that was particularlyinfluential in the DOL debate. It may be a more effective way toadvocate in the future.

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Jane Wollman Rusoff

Jane Wollman Rusoff is a ThinkAdvisor contributing editor specializing in interviews with thought leaders. She has written for ThinkAdvisor since its inception and was a contributing editor to Research magazine, a predecessor to ThinkAdvisor, starting in 1992.

Jane has received two AZBEE Awards from the American Society of Business Publication Editors. She has contributed articles to The New York Times, The Washington Post, the Los Angeles Times and Esquire, among numerous other publications.

Jane has written or co-authored five books, including three written with “Tonight” show creator Steve Allen. Jane was a staff editor with London Express Features and Billboard’s Merchandising Magazine. She has interviewed and profiled thousands of entertainment personalities, including Ray Charles, George Clooney, Angelina Jolie and Meryl Streep.

Jane is the founder of www.FamilyStarProductions.com.