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Testimony of Ron Rhoades at DOL Hearing on Proposed Conflict of Interest Regs

"The huge extraction of rents by Wall Street and the insurance companies must stop. The size of the financial services sector, relative to the overall U.S. economy, has grown from under 3% in 1950 to well over 30%, and perhaps even 40%, today.... Due to conflicts of interest, many individual investors have not accumulated enough for retirement. As a result, the burden upon federal, state and local governments to provide for our retired citizens increases.... The fiduciary standard is a much-needed correction to the current unworkable system for the provision of retirement advice. The suitability standard, on the other hand, is not the answer."

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Is Famed Fiduciary Advocate Ron Rhoades Ready to Concede Defeat?

"[Rhoades recently predicted that the] DOL's new Fiduciary Rule will not apply to IRAs and the SEC will offer a 'New Federal Fiduciary Standard.' This new standard would include the same suitability standard as currently practiced by non-fiduciaries but with 'casual disclosure' requirements added on.... While an industry sponsored study claims billions of dollars in retirement assets will leave brokers if the DOL's proposed Fiduciary Rule were to include IRA, Rhoades says what the industry doesn't tell you is that it's really a migration already taking place."

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Professionalism for Financial Planners

"The securities industry must recognize that the fiduciary standard operates as a constraint on greed. Through its application certain insidious business practices -- such as payment for shelf space, the receipt of soft dollar compensation far in excess of the value of research supplied to mutual funds, and 'double dipping' of fees, are prohibited under such a standard."

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Prof. Ron Rhoades Provides Detailed Critique of the DOL Proposed Fiduciary Rule

"BICE could be misconstrued, in several respects, so as to permit over time the perverse economic incentives that result from conflicts of interest.... [We] have to view the Best Interest Contract Exemption (or BICE) as a temporary, interim measure, designed to permit the investment industry time to adjust to a true fiduciary environment. Otherwise, BICE could institutionalize best practices, particularly if it is not applied correctly in FINRA arbitration, which appears likely.... BICE's permission of differential compensation to the firm (although not to the individual advisor) presents a huge difficulty.... the DOL should set forth examples of unreasonable compensation.... the DOL should tie the receipt of compensation, in time, to the delivery of services."  MORE >>

Interview With Prof. Ron Rhoades on Revenue Sharing

I would advise plan sponsors to avoid any revenue-sharing arrangements, of any type, between the advisors and other vendors of the plan. This includes not only payment for shelf space, but also soft dollar compensation and other 'back-channel' payments. Establish the compensation of the investment adviser in advance -- before any investment recommendations are made -- either as a flat fee, hourly fee, or percentage of assets (or some combination thereof).  MORE >>

Most Nevada Financial Planners Become Fiduciaries Per State Law on July 1

"On July 1, 2017, nearly all of those providing financial planning services, or holding out as financial planners, to clients located in Nevada, or those investment advisers and registered representatives who are located in Nevada, become subject to fiduciary duties as defined by Nevada state law.... The Nevada law also authorizes the Administrator of Securities 'to adopt regulations defining or excluding acts, practices or courses of business as violations of that fiduciary duty and prescribing means to prevent violations of that fiduciary duty.' ... The rule making by the Administrator of Securities will be crucial in order to preserve a bona fide fiduciary standard upon financial planners in Nevada."

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Understanding the Retirement Probability Simulator (RPS): A Complement to the Actuarial Financial Planner

"The Retirement Probability Simulator provides insight into the volatility and uncertainty inherent in investment returns. The Actuarial Financial Planner provides a disciplined, liability‑driven foundation for determining sustainable spending. Used together, they offer a more complete picture of retirement readiness than either tool can provide alone."  MORE >>

Financial Planners as Fiduciaries

"Those who offer financial planning services, in situations unrelated to ERISA's realm, like other financial advisors, may or may not have a fiduciary duty to their clients depending on the specifics of the engagement. Financial planners, much like other functional fiduciaries, are deemed to have fiduciary responsibility when their activities fall under the definitions found in applicable laws, regulations, or professional standards that impose a fiduciary standard of care."  MORE >>

SEC Offers Primer on Selecting a Financial Planner

"Finding the right financial planner can be a confusing process. To simplify the search, the SEC has released a new bulletin that contains tips for finding one. It also contains a list of questions consumers should ask planners -- and that all planners should be prepared to answer."

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GAO Report: Regulatory Coverage Generally Exists for Financial Planners, But Consumer Protection Issues Remain

51 pages. "This report examines [1] how financial planners are regulated and overseen at the federal and state levels, [2] what is known about the effectiveness of this regulation, and [3] the advantages and disadvantages of alternative regulatory approaches. To address these objectives, GAO reviewed federal and state statutes and regulations, analyzed complaint and enforcement activity, and interviewed federal and state government entities and organizations representing financial planners, various other arms of the financial services industry, and consumers." [GAO-11-235, Jan. 18, 2011]

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The Two Basic Equations Underlying the Actuarial Financial Planner

"The [actuarial financial planner (AFP)] uses two relatively straightforward equations ... to help you balance your needs in retirement to grow your assets, protect your assets and prudently spend your assets.... While generation of an actuarial balance sheet, annual spending budget and liability-driven investment strategy is a relatively simple matter using these equations, the plan produced by the AFP (with annual adjustments and periodic stress testing) is quite robust[.]"  MORE >>

Five Questions to Ask a Financial Planner Before Investing

"[W]orking with a competent professional is still the best chance many people have to achieve a comfortable retirement.... Here are a few qualifying questions you should ask if you are thinking about hiring a financial planner: [1] What are your qualifications, and how do these qualifications benefit me? ... [2] What exactly do you do for your clients? ... [3] What is the income and asset level of your typical client? ... [4] How are you compensated? ... [5] Do you know anybody who can help me with other services?"  MORE >>

GAO Concludes Existing Regulation Covers Financial Planners

[The GAO] recommended that the National Association of Insurance Commissioners ... assess consumers' understanding of the standards of care associated with the sale of insurance products and that the SEC determine how well investors understand financial planners' titles and designations.  MORE >>

Survey of Financial Planners Says DOL's Fiduciary Rule Already Hurting Savers, Financial Professionals

"The Financial Services Roundtable ... polled 600 financial advisers [in July 2017]. The survey, conducted ... one month after the rule's June 9 initial compliance deadline, shows 'significant disruption' to the marketplace ... A majority of the poll's respondents, or 50 percent, report the rule is restricting them from serving their clients' best interests."  MORE >>

Retirement Spending: Calm Your Financial Fears with the Actuarial Financial Planner

"In the current economic environment, we are looking at the distinct possibilities of higher-than-expected levels of inflation, rising interest rates, negative returns on investments and reductions in future Social Security benefits.... [W]hat is a retiree to do today to mitigate financial risks and sleep better at night? [1] Periodically adjust spending budget to reflect actual experience ... [2] Use a floor portfolio to fund essential expenses ... [3] Use conservative assumptions ... [4] Spend less."

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Financial Planners Must Push Forward as Advocates for Investors

"Based on past statements from Republican officials on Capitol Hill, there is every reason to believe that an undivided Republican Congress will repeal the Dodd-Frank Act, and President Trump will unravel the DOL fiduciary rule. The odds are that all this will happen within the first couple of months of the new year. However you feel about a Trump presidency, this will be a severe setback for the concept of professionalism in the financial planning world, and the strong fiduciary standard generally."  MORE >>

Updated Actuarial Financial Planner Models

"[T]he AFP models [have been updated] to permit inputting of additional non-recurring income and expense items. These new cells will enable you to estimate present values of items such as: [1] Social Security survivor benefits; [2] Survivor benefits under Joint and Survivor annuities; [3] Future home sales; [4] Possible future Social Security cuts, and [5] Many types of expected future non-recurring expenses."

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SEC Faces Second Lawsuit Over Reg BI, This Time from Fee-Only Financial Planners

"[T]he claims are similar enough as those brought by the states and it is likely the cases will be consolidated.... [We] can expect to see additional lawsuits brought (and maybe/probably in different court(s)). Missing from the mix thus far are consumer protection groups who will seek to represent the views of the customers who purchase advisory services."  MORE >>

Financial Planners Will Face Fiduciary Regulation, Demographics Pressures in 2014

"While there may be no big new final rules implemented in 2014, this may be the year where we finally see the fiduciary template the DOL is going to set forward, which could become the precedent for the SEC as well. And either way, the SEC is finally increasing its focus on more exams for investment advisers, even if it takes user fees to fund the effort."  MORE >>

Brokerage Firms Debate Value of Certified Financial Planner Title

"With consumer faith in brokers' investment skills shaken -- and commissions for simple buy and sell orders slipping -- brokers are positioning themselves as trusted advisers that help clients meet goals ranging from saving for college to estate planning. Yet while some firms are pushing their brokers to earn the CFP credential as a way of attracting clients and profits, others say the bottom line benefits have not been proven."  MORE >>