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'Real' financial advisors do not fear the retirement-savings rule

After riding a populist wave to the White House, President Donald Trump has awarded a major victory to the financial product sales machine at the expense of individual investors by "delaying" the implementation of a Department of Labor ruling requiring that brokers and financial advisors act in the best interest of the clients when providing retirement advice.

President Trump last week issued a presidential memorandum that instructed the Department of Labor to undertake an economic and legal review of the fiduciary rule to see if it determines there are any conflicts with the administration's regulatory principles.

The retirement-savings rule, which has faced a great deal of scrutiny and survived, has been years in the making.

The Department of Labor fiduciary rule has been opposed by many of the companies expected to see meaningfully reduced profits if they're required to put their clients' interest ahead of their own. The chief mouthpiece of the anti-fiduciary movement has been hedge fund manager Anthony Scaramucci, who a few months ago offered an interesting perspective on the Department of Labor requirement.

SkyBridge Capital founder Anthony Scaramucci.
Albin Lohr-Jones | Pool via Bloomberg | Getty Images
SkyBridge Capital founder Anthony Scaramucci.

"It's about like the Dred Scott decision," said Scaramucci, drawing a bizarre parallel between an 1857 Supreme Court ruling that held that African Americans were not U.S. citizens and the recent U.S. Department of Labor fiduciary rule that requires financial advisors to retirement accounts to act only in the best interest of their clients.

When I first saw the headline and the quote, I wondered if it was a joke — a "Saturday Night Live" skit, perhaps? But upon further investigation, I was shocked to find that this hyperbolic twist of logic had actually happened.

Precisely who does Scaramucci believe is suffering systemic discrimination in this case? You're not going to believe this: financial salespeople. The Department of Labor is "judging what should happen in a free market and attempting to put financial advisors out of work," he said.

As for Scaramucci, he won a bold bet on President Trump — then turned around and lost it.

The founder of hedge fund Skybridge Capital's appointment as White House advisor and public liaison — was apparently secured after he was among Trump's few public supporters on Wall Street before the election. According to published reports, he is now getting nixed amid a prolonged probe into the planned sale of his fund to a Chinese conglomerate with reported ties to the communist party.

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And exactly how would the Department of Labor's rule put financial advisors out of work? By requiring them to be fiduciaries; by requiring them to put their clients' interests ahead of their own.

Let me be clear: Real financial advisors do not fear the fiduciary rule.

"Real" financial advisors — for instance, those tested, licensed and regulated by the Securities and Exchange Commission as Registered Investment Advisors — are already held to a fiduciary standard, for starters. It is only brokers and other advisors, who sell financial products for a commission, that are clinging to a lesser bar.

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Real financial advisors overwhelmingly support the Department of Labor's fiduciary rule, which at present only applies to Americans' retirement accounts. While the rule isn't perfect and contains some loopholes, real financial advisors embrace the wider application of the fiduciary standard and remain hopeful that the rule will expand further to ensure anyone who receives financial advice on any account or in any capacity is also protected by it.

Real financial advisors don't see this as a political issue or as regulatory overreach, but as a matter of right and wrong.

— By Tim Maurer, director of personal finance at Buckingham and The BAM Alliance

(Editor's Note: An earlier version of this story originally appeared on Oct. 21, 2016.)