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Op-Ed: John Oliver was correct to use the ‘F word’ about advisors

Comedian John Oliver went on a televised rant after he discovered that employees at his production company were being ripped off by their 401(k) plan — because the broker who sold it to them wasn't required to act in their best interests. In other words, the broker wasn't a fiduciary.

The bottom line is that a fiduciary is legally obligated to put their clients' best interests ahead of their own. But, as Oliver points out, not all financial advisors are fiduciaries.

The TV segment, which first aired in June on Oliver's HBO show "Last Week Tonight," hit more than 4 million views on YouTube, putting a mass-media spotlight on a very important issue with which the financial services industry has been grappling for years.

Comedian John Oliver takes a shot at non-fiduciary financial advisors and their spiraling 401(k) fees on a recent segment of "Last Week Tonight."
Source: Last Week Tonight | HBO | YouTube
Comedian John Oliver takes a shot at non-fiduciary financial advisors and their spiraling 401(k) fees on a recent segment of "Last Week Tonight."

It's basically that conflicts of interest exist between brokers who work on commission and make a profit from selling financial products and the investors/clients who look to them for financial advice without realizing they are dealing with salespeople.

The Department of Labor passed a new rule earlier this year requiring that financial advisors who work with clients on retirement plans abide by a fiduciary standard. Unfortunately, in order to get the new rule passed, the DOL made some concessions to the financial industry.

Why? Because various financial services organizations voiced concerns about how this new rule would have a negative impact on investors and that it would hamper a broker (with non-fiduciary duties) from generating any profits.

"Now it's the SEC's turn to step up on the fiduciary ruling. ... In the meantime, it's the investor's responsibility to find a financial advisor who isn't afraid to use the 'F word.'"

As a result, the rule is riddled with loopholes that keep it from adequately eliminating conflicts of interest that can be detrimental to investors. Brokers can still sell proprietary products to clients — products for which they get paid a commission and/or that will benefit their own firm's bottom line — as long as they provide dense legalistic disclosures.

Moreover, the DOL rule only applies to workplace retirement-plan accounts, such as 401(k) plans and individual retirement accounts. The government body that regulates the broader investment community is the U.S. Securities and Exchange Commission. When it comes to protecting investors and advocating for a fiduciary standard, the SEC is simply not doing enough.

To really move the needle in terms of protecting consumers, the SEC should take some cues from the Food and Drug Administration, another government agency tasked with protecting consumers from products that could harm them. Arguably, financial health is as critical a component of overall well-being as physical health, so shouldn't they be regulated with similar rigor?

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A new prescription drug takes years to test, vet and bring to market. The average time-to-market for a new mutual fund is about three months. If a drug that the FDA approved later turns out to be harmful, the FDA recalls it. But the SEC never prosecuted the worst offenders in the 2008 financial crisis — and it even failed to pursue Bernie Madoff, despite the fact that it had been tipped off about his scam long before he confessed.

The DOL gave it a shot and came up short. Now it's the SEC's turn to step up on the fiduciary ruling. Whether or not this will happen remains to be seen. In the meantime, it's the investor's responsibility to find a financial advisor who isn't afraid to use the "F word."

— By Elliot Weissbluth, CEO of HighTower