It’s getting to the point where everyone is a fiduciary expert now.
I don’t mean they are an expert fiduciary, I mean they espouse a certain confidence when it comes to fiduciary matters.
One often wonders where these folks were a decade or so when the wind was blowing the other way. In either case, it’s good to have them on the field playing with such enthusiasm.
There was a lot of activity in the arena this past week with the not-so-surprising decision by the 5th Circuit Court of Appeals to vacate the Obama DOL’s “Conflict-of-Interest” (ak “fiduciary”) rule. Despite the claims of the rule’s opponents, the 5th Circuit’s decision may have only limited jurisdiction (see, “Exclusive Interview: Ary Rosenbaum says Scottrade Still on the Hook Despite 5th Circuit Ruling,” FiduciaryNews.com, March 20, 2018).
Let’s look at the face of the thing. Those who created the rule felt it was clothed in impenetrable armor. When your guy is sitting in the White House, and you’re a political citizen, it certainly does seem lucky your work can be made invulnerable. But the winds change. If there’s one reality in politics it’s this: Nobody cares about you once you leave office.
Don’t get me wrong. Your core fans will always idolize you. The challenge is to prevent them from lulling you into believing you’re still who you used to be. You’re not. It’s over. Somebody else has the keys to the car. Get over it. Enjoy retirement.
If this sounds like self-reflective bitterness, well…
But here’s the real deal, and the irony of both the 5th Circuit’s ruling and the response it generated. First, no case is fool-proof. Once you venture away from sympathetic and friendly judges, your case will be judged on the merits, not on the politics. One sense of irony is the feeling that the 5th Circuit was the more political venue. In reality, it is no more or less political than any other court, as we’ve seen not only in the various rulings regarding the fiduciary rule, but in other policy matters.
The true irony, though, is this: The 5th Circuit’s decision now greases the path for the fiduciary standard to become a true standard, one unencumbered by the noose of regulation. This, in essence, is the ultimate lesson on how to fight – and how not to fight – the playground bully.
There are no adults on the playground. Sure, you can call them in when you need to, but they aren’t there in the heat of the moment. And that moment could mean all the difference in the world.
The playground is the marketplace. The adults are the regulators. The bullies are the competition. (This isn’t a statement of judgment, it’s merely a relative assessment. Like the playground bully, the competition wants your lunch money – and you want their lunch money. If you don’t live this parallel every day, then you’re either a monopoly or about to be looking for another job.)
There is this recurring problem with training kids to call adults whenever a bully challenges them. It doesn’t stop the bullies. It might interrupt their actions for a short time, but, like I said, the adults can’t be on the playground at all times. The bullies will find a loophole. And then they’ll return. And the adults won’t be there.
That’ll teach those kids to rely on adults.
If the regulators are the adults, then what’s gained by relying on them? They may hold back the competition momentarily, but the competition will return, albeit with a slight twist to satisfy the prevailing compliance regimen.
Some fiduciary advocates felt this was the problem from the very beginning with the DOL’s fiduciary rule. In trying to keep the opponents happy, the DOL created loopholes big enough for a 747 to drive through. And this was done all while retaining the “fiduciary” nomenclature.
While advocates debated whether it was better to accept half a loaf instead of a full loaf, opponents, emboldened by the concessions they received, decided to take back that half a loaf they lost. And the 5th Circuit finally gave it to them.
The delicious irony is, as a result, the opponents of the fiduciary standard lost. By opposing the DOL’s fiduciary rule, (what some felt created a watered-down fiduciary standard), they’ve allowed the proponents of the fiduciary standard to return to the drawing board.
There are those who mistakenly believe this means allowing the SEC to take its swing at the plate. Nope. The SEC is no different than the DOL. They are simply the adult that can’t be on the playground at all times.
The true solution for fiduciary advocates is to follow through with their ardency in the marketplace. That’s right. Stand up to and fight the bully in the playground. That requires skill, determination, and not a small amount of preparation. What it doesn’t require is an adult.
And here’s the great news about the 5th Circuit’s decision: The game has been stripped of its rules.
Good luck, and may the best fiduciary win.