I don't know what to make of this. some say it's against the middle class

[JakeStarkey]

Sure you are. Your flat fee is based on the amount of the investment.

What you want is the leeway to make larger investments on behalf of your unwary customer to maximize your profit.

Too bad, so sad, real mad for you.

"Too bad, so sad, real mad for you" How old are you, 14? Did a child or grandchild of yours type that? And why don't you balls to quote me, Jake? So now you're down to "making larger investments to maximize my profit". Gee whiz. The more they make, the more I make. Yes, that's how it works, Jake. Clearly you don't even know THAT, yet you think you know the ramifications of the DOL law. Love it. Great stuff, Jake. Catty comments, lies, insults, straw men, ignorance AND deflection. Yet another Jake Combo Special. Like dealing with a child.
.

Oh, now "they more they make, the more I make." So are you on commission? Or are you not? You are a liar, and I doubt not you were barred out of the profession long ago.

 

[HenryBHough]

When is dealing with a pre-teen NOT dealing with a child?

 

[Mac1958]

Sure you are. Your flat fee is based on the amount of the investment.

What you want is the leeway to make larger investments on behalf of your unwary customer to maximize your profit.

Too bad, so sad, real mad for you.

"Too bad, so sad, real mad for you" How old are you, 14? Did a child or grandchild of yours type that? And why don't you balls to quote me, Jake? So now you're down to "making larger investments to maximize my profit". Gee whiz. The more they make, the more I make. Yes, that's how it works, Jake. Clearly you don't even know THAT, yet you think you know the ramifications of the DOL law. Love it. Great stuff, Jake. Catty comments, lies, insults, straw men, ignorance AND deflection. Yet another Jake Combo Special. Like dealing with a child.
.

Oh, now "they more they make, the more I make." So are you on commission? Or are you not? You are a liar, and I doubt not you were barred out of the profession long ago.

Uh, no, that's how fee-based arrangements work, Jake. I'm paid a flat percentage on the value of the account. The higher the value of the account, the higher my quarterly fee. The more they make, the more they have, the more I make based on that percentage of the value of the account.

That's what "fee based" means, Jake. Clearly you didn't know that. And you're pretending to know the DOL rule???

Wow, you really have lost it. You really have made a fool of yourself here, Jake.

Why in the world are you staying on this? All nasty, personal, yikes -- you're flailing here, and I'm beginning to suspect you and JoeB are the same person.


I'm so far up in the heads of the Regressive Left at this point, they go freakin' mental on me. Meltdown time for ol' Jake. Don't blame me.
.

 

[william the wie]

lunatic left is a redundancy. I was actually asked what kind of computer runs on linear programming.

 

[Mac1958]

Crickets.


.

 

[Skull Pilot]

Why do any of you people use investment advisers when you can do just fine on your own?

 

[Mac1958]

Why do any of you people use investment advisers when you can do just fine on your own?

Two reasons.

First, there are plenty of people who are just not comfortable with finance and would rather have a professional do it. Ask me to rebuild a transmission and you'll see me on the floor in the fetal position pretty quickly. That's how they are with personal investing.

Second, an experienced and properly-educated advisor will also assist on minimizing tax exposure, retirement income planning, estate planning issues, outside investments such as real estate, business buying & selling & operating, family communication, working with attorneys, on & on. I have clients who know investing pretty well but use me because I can see the big picture - plus, they're just too busy for proper investment analysis and tactical buying/selling.

But yeah, many can do this stuff on their own.
.

 

[Skull Pilot]

Why do any of you people use investment advisers when you can do just fine on your own?

Two reasons.

First, there are plenty of people who are just not comfortable with finance and would rather have a professional do it. Ask me to rebuild a transmission and you'll see me on the floor in the fetal position pretty quickly. That's how they are with personal investing.

Second, an experienced and properly-educated advisor will also assist on minimizing tax exposure, retirement income planning, estate planning issues, outside investments such as real estate, business buying & selling & operating, family communication, working with attorneys, on & on. I have clients who know investing pretty well but use me because I can see the big picture - plus, they're just too busy for proper investment analysis and tactical buying/selling.

But yeah, many can do this stuff on their own.
.

An investment adviser does not do estate planning that's a lawyer

An investment adviser takes your money and puts in different vehicles for you and then takes a percentage of your portfolio every quarter

Anyone with a computer and a little diligence can pick their own investments

The only strategy for the average save for retirement investors is long term buy and hold in a balanced portfolio that is rebalanced quarterly

 

[Mac1958]

Why do any of you people use investment advisers when you can do just fine on your own?

Two reasons.

First, there are plenty of people who are just not comfortable with finance and would rather have a professional do it. Ask me to rebuild a transmission and you'll see me on the floor in the fetal position pretty quickly. That's how they are with personal investing.

Second, an experienced and properly-educated advisor will also assist on minimizing tax exposure, retirement income planning, estate planning issues, outside investments such as real estate, business buying & selling & operating, family communication, working with attorneys, on & on. I have clients who know investing pretty well but use me because I can see the big picture - plus, they're just too busy for proper investment analysis and tactical buying/selling.

But yeah, many can do this stuff on their own.
.

An investment adviser does not do estate planning that's a lawyer

An investment adviser takes your money and puts in different vehicles for you and then takes a percentage of your portfolio every quarter

Anyone with a computer and a little diligence can pick their own investments

The only strategy for the average save for retirement investors is long term buy and hold in a balanced portfolio that is rebalanced quarterly

A CFP can coordinate estate planning pretty easily without a lawyer, and/or work with the family lawyer on the plan. I do it all the time, attorneys often need my services and input on family finances.

If you don't need the other services I described, and you're comfortable doing it yourself, great.

Many, many people are not. To them it's worth 1% or whatever. Why is that such a big deal?
.

 

[Windship]

oblama=traitor. bush=traitor. They all make law and policy that continues to erode the backbone and builder of what was a very strong economy. So, I guess my comment would be..."duh".
oblama...a dem...supposed to be for the working class and continues to let in cheap labor from mex, H1B visa's (increasing at 250k per yr since oblama was elected) and make lopsided trade deals. Clinton was an enemy of labor as well for the same reasons.

 

[rightwinger]

Obama vetoes attempt to undo retirement savings rule

President Obama vetoed an effort to roll back new rules intended to protect retirement savings Wednesday, solidifying his administration's regulations requiring investment advisers to look out for their clients' best interests.

"The Department of Labor's final rule will ensure that American workers and retirees receive retirement advice that is in their best interest, better enabling them to protect and grow their savings," Obama said in a veto message to Congress. "It is essential that these critical protections go into effect."

The bastard

 

[Windship]

...course, you stock market sit on yer ass and profit from it all dont you?

 

[Mac1958]

Obama vetoes attempt to undo retirement savings rule

I have some time here to go into a bit of detail.

Up front, the law has some good qualities, I'm not saying that it does not. But it's another classic case of over-reacting to a problem and throwing the baby out with the bathwater. To wit:

The law is going to (1) cause further consolidation in the advisory industry because of increased regulatory administration costs, so The Big Boys so loathed by many who support this law are going to benefit. It's already happening, even though the law doesn't go into effect until next April and is not going to be enforced until January 2018.

The law is going to (2) leave smaller investors out in the cold because it won't be worth it to many advisors to work with them. This will mean that many investors who would also benefit from the investment, tax, college funding and many other services included in advisory relationships will be on their own. Sorry.

The law is going to (3) benefit older, established advisors because it's going to kill off AT LEAST 25% to 33% of younger advisors pretty much overnight. Those clients will have to go somewhere and obtaining them with the reduced competition will be easier. This, at a time when the industry is damn near desperate for young advisors.

Here's an example - remember, fees are the big deal, right?: Let's say we have a young family, Mom & Dad working hard and putting money into their 401K plans. They have accumulated $108,587 in those plans. They change jobs and want to roll those old plans into IRAs. They go to a younger advisor who offers to put them in American Funds A Share mutual funds, which charge a one-time, 3.50% up front load on those funds at that balance amount. They'd be using four excellent, Morningstar 4-star and 5-star rated mutual funds (let's say AMRMX, NEWFX, ABALAX, AWSHX), and the advisor and his firm would be responsible for managing the account. Over ten years, because they only paid the up front fee once, they would have averaged only about 0.40% annually in fees for their advisor (plus, I think, 12b-1 fees of about .25% per year, I don't remember). That evil young advisor, depending on his contract, would make a one-time fee of anywhere from $1,000 to $2,700 but would be permanently, legally responsible for that account.

Those days are gone. Poof.

So, they come to me, and I charge them my regular fee for accounts of that (smaller) size, 1.20% annually (and actually, I don't know that I would necessarily take them on). Plus, I'm making more annually, every year, as it grows. I'm using good funds, too, of course, but can I guarantee that they'd be better off than they would have been with American Funds? Nope.

So they're paying a ton more in fees over ten years than they had to, because of this law, with ZERO guarantee of better performance.

And one more thing: If they only have $23,000 and go to that younger advisor, he's gone, because he couldn't afford to live on small annual fees alone. They don't have enough to work with me or anyone like me. So, good luck, tough crap. Buy some books on investing and taxation and college planning and tough questions and general financial guidance and family issues and whatever else you need help with. And if you're not comfortable with all of the above, sorry.

Is that really "in their best interest"?
.

 

[Tehon]

Obama vetoes attempt to undo retirement savings rule

I have some time here to go into a bit of detail.

Up front, the law has some good qualities, I'm not saying that it does not. But it's another classic case of over-reacting to a problem and throwing the baby out with the bathwater. To wit:

The law is going to (1) cause further consolidation in the advisory industry because of increased regulatory administration costs, so The Big Boys so loathed by many who support this law are going to benefit. It's already happening, even though the law doesn't go into effect until next April and is not going to be enforced until January 2018.

The law is going to (2) leave smaller investors out in the cold because it won't be worth it to many advisors to work with them. This will mean that many investors who would also benefit from the investment, tax, college funding and many other services included in advisory relationships will be on their own. Sorry.

The law is going to (3) benefit older, established advisors because it's going to kill off AT LEAST 25% to 33% of younger advisors pretty much overnight. Those clients will have to go somewhere and obtaining them with the reduced competition will be easier. This, at a time when the industry is damn near desperate for young advisors.

Here's an example - remember, fees are the big deal, right?: Let's say we have a young family, Mom & Dad working hard and putting money into their 401K plans. They have accumulated $108,587 in those plans. They change jobs and want to roll those old plans into IRAs. They go to a younger advisor who offers to put them in American Funds A Share mutual funds, which charge a one-time, 3.50% up front load on those funds at that balance amount. They'd be using four excellent, Morningstar 4-star and 5-star rated mutual funds (let's say AMRMX, NEWFX, ABALAX, AWSHX), and the advisor and his firm would be responsible for managing the account. Over ten years, because they only paid the up front fee once, they would have averaged only about 0.40% annually in fees for their advisor (plus, I think, 12b-1 fees of about .25% per year, I don't remember). That evil young advisor, depending on his contract, would make a one-time fee of anywhere from $1,000 to $2,700 but would be permanently, legally responsible for that account.

Those days are gone. Poof.

So, they come to me, and I charge them my regular fee for accounts of that (smaller) size, 1.20% annually (and actually, I don't know that I would necessarily take them on). Plus, I'm making more annually, every year, as it grows. I'm using good funds, too, of course, but can I guarantee that they'd be better off than they would have been with American Funds? Nope.

So they're paying a ton more in fees over ten years than they had to, because of this law, with ZERO guarantee of better performance.

And one more thing: If they only have $23,000 and go to that younger advisor, he's gone, because he couldn't afford to live on small annual fees alone. They don't have enough to work with me or anyone like me. So, good luck, tough crap. Buy some books on investing and taxation and college planning and tough questions and general financial guidance and family issues and whatever else you need help with. And if you're not comfortable with all of the above, sorry.

Is that really "in their best interest"?
.

Where does the Best Interest Contract Exemption fit in to your scenario?

 

[Mac1958]

Obama vetoes attempt to undo retirement savings rule

I have some time here to go into a bit of detail.

Up front, the law has some good qualities, I'm not saying that it does not. But it's another classic case of over-reacting to a problem and throwing the baby out with the bathwater. To wit:

The law is going to (1) cause further consolidation in the advisory industry because of increased regulatory administration costs, so The Big Boys so loathed by many who support this law are going to benefit. It's already happening, even though the law doesn't go into effect until next April and is not going to be enforced until January 2018.

The law is going to (2) leave smaller investors out in the cold because it won't be worth it to many advisors to work with them. This will mean that many investors who would also benefit from the investment, tax, college funding and many other services included in advisory relationships will be on their own. Sorry.

The law is going to (3) benefit older, established advisors because it's going to kill off AT LEAST 25% to 33% of younger advisors pretty much overnight. Those clients will have to go somewhere and obtaining them with the reduced competition will be easier. This, at a time when the industry is damn near desperate for young advisors.

Here's an example - remember, fees are the big deal, right?: Let's say we have a young family, Mom & Dad working hard and putting money into their 401K plans. They have accumulated $108,587 in those plans. They change jobs and want to roll those old plans into IRAs. They go to a younger advisor who offers to put them in American Funds A Share mutual funds, which charge a one-time, 3.50% up front load on those funds at that balance amount. They'd be using four excellent, Morningstar 4-star and 5-star rated mutual funds (let's say AMRMX, NEWFX, ABALAX, AWSHX), and the advisor and his firm would be responsible for managing the account. Over ten years, because they only paid the up front fee once, they would have averaged only about 0.40% annually in fees for their advisor (plus, I think, 12b-1 fees of about .25% per year, I don't remember). That evil young advisor, depending on his contract, would make a one-time fee of anywhere from $1,000 to $2,700 but would be permanently, legally responsible for that account.

Those days are gone. Poof.

So, they come to me, and I charge them my regular fee for accounts of that (smaller) size, 1.20% annually (and actually, I don't know that I would necessarily take them on). Plus, I'm making more annually, every year, as it grows. I'm using good funds, too, of course, but can I guarantee that they'd be better off than they would have been with American Funds? Nope.

So they're paying a ton more in fees over ten years than they had to, because of this law, with ZERO guarantee of better performance.

And one more thing: If they only have $23,000 and go to that younger advisor, he's gone, because he couldn't afford to live on small annual fees alone. They don't have enough to work with me or anyone like me. So, good luck, tough crap. Buy some books on investing and taxation and college planning and tough questions and general financial guidance and family issues and whatever else you need help with. And if you're not comfortable with all of the above, sorry.

Is that really "in their best interest"?
.

Where does the Best Interest Contract Exemption fit in to your scenario?

As I understand BICE, it allows contracts in place to be grandfathered in, so for example if a 401K plan is based on A Shares that would continue, although the sponsor would have to receive full disclosure. Another pile of paperwork, no doubt.

Doesn't affect me personally, I'm fee-only, no conflicts of interest.
.

 

[Tehon]

Obama vetoes attempt to undo retirement savings rule

I have some time here to go into a bit of detail.

Up front, the law has some good qualities, I'm not saying that it does not. But it's another classic case of over-reacting to a problem and throwing the baby out with the bathwater. To wit:

The law is going to (1) cause further consolidation in the advisory industry because of increased regulatory administration costs, so The Big Boys so loathed by many who support this law are going to benefit. It's already happening, even though the law doesn't go into effect until next April and is not going to be enforced until January 2018.

The law is going to (2) leave smaller investors out in the cold because it won't be worth it to many advisors to work with them. This will mean that many investors who would also benefit from the investment, tax, college funding and many other services included in advisory relationships will be on their own. Sorry.

The law is going to (3) benefit older, established advisors because it's going to kill off AT LEAST 25% to 33% of younger advisors pretty much overnight. Those clients will have to go somewhere and obtaining them with the reduced competition will be easier. This, at a time when the industry is damn near desperate for young advisors.

Here's an example - remember, fees are the big deal, right?: Let's say we have a young family, Mom & Dad working hard and putting money into their 401K plans. They have accumulated $108,587 in those plans. They change jobs and want to roll those old plans into IRAs. They go to a younger advisor who offers to put them in American Funds A Share mutual funds, which charge a one-time, 3.50% up front load on those funds at that balance amount. They'd be using four excellent, Morningstar 4-star and 5-star rated mutual funds (let's say AMRMX, NEWFX, ABALAX, AWSHX), and the advisor and his firm would be responsible for managing the account. Over ten years, because they only paid the up front fee once, they would have averaged only about 0.40% annually in fees for their advisor (plus, I think, 12b-1 fees of about .25% per year, I don't remember). That evil young advisor, depending on his contract, would make a one-time fee of anywhere from $1,000 to $2,700 but would be permanently, legally responsible for that account.

Those days are gone. Poof.

So, they come to me, and I charge them my regular fee for accounts of that (smaller) size, 1.20% annually (and actually, I don't know that I would necessarily take them on). Plus, I'm making more annually, every year, as it grows. I'm using good funds, too, of course, but can I guarantee that they'd be better off than they would have been with American Funds? Nope.

So they're paying a ton more in fees over ten years than they had to, because of this law, with ZERO guarantee of better performance.

And one more thing: If they only have $23,000 and go to that younger advisor, he's gone, because he couldn't afford to live on small annual fees alone. They don't have enough to work with me or anyone like me. So, good luck, tough crap. Buy some books on investing and taxation and college planning and tough questions and general financial guidance and family issues and whatever else you need help with. And if you're not comfortable with all of the above, sorry.

Is that really "in their best interest"?
.

Where does the Best Interest Contract Exemption fit in to your scenario?

As I understand BICE, it allows contracts in place to be grandfathered in, so for example if a 401K plan is based on A Shares that would continue, although the sponsor would have to receive full disclosure. Another pile of paperwork, no doubt.

Doesn't affect me personally, I'm fee-only, no conflicts of interest.
.

It allows those A share mutual funds to be sold to new investors once a full disclosure agreement has been signed.

 

[Mac1958]

Obama vetoes attempt to undo retirement savings rule

I have some time here to go into a bit of detail.

Up front, the law has some good qualities, I'm not saying that it does not. But it's another classic case of over-reacting to a problem and throwing the baby out with the bathwater. To wit:

The law is going to (1) cause further consolidation in the advisory industry because of increased regulatory administration costs, so The Big Boys so loathed by many who support this law are going to benefit. It's already happening, even though the law doesn't go into effect until next April and is not going to be enforced until January 2018.

The law is going to (2) leave smaller investors out in the cold because it won't be worth it to many advisors to work with them. This will mean that many investors who would also benefit from the investment, tax, college funding and many other services included in advisory relationships will be on their own. Sorry.

The law is going to (3) benefit older, established advisors because it's going to kill off AT LEAST 25% to 33% of younger advisors pretty much overnight. Those clients will have to go somewhere and obtaining them with the reduced competition will be easier. This, at a time when the industry is damn near desperate for young advisors.

Here's an example - remember, fees are the big deal, right?: Let's say we have a young family, Mom & Dad working hard and putting money into their 401K plans. They have accumulated $108,587 in those plans. They change jobs and want to roll those old plans into IRAs. They go to a younger advisor who offers to put them in American Funds A Share mutual funds, which charge a one-time, 3.50% up front load on those funds at that balance amount. They'd be using four excellent, Morningstar 4-star and 5-star rated mutual funds (let's say AMRMX, NEWFX, ABALAX, AWSHX), and the advisor and his firm would be responsible for managing the account. Over ten years, because they only paid the up front fee once, they would have averaged only about 0.40% annually in fees for their advisor (plus, I think, 12b-1 fees of about .25% per year, I don't remember). That evil young advisor, depending on his contract, would make a one-time fee of anywhere from $1,000 to $2,700 but would be permanently, legally responsible for that account.

Those days are gone. Poof.

So, they come to me, and I charge them my regular fee for accounts of that (smaller) size, 1.20% annually (and actually, I don't know that I would necessarily take them on). Plus, I'm making more annually, every year, as it grows. I'm using good funds, too, of course, but can I guarantee that they'd be better off than they would have been with American Funds? Nope.

So they're paying a ton more in fees over ten years than they had to, because of this law, with ZERO guarantee of better performance.

And one more thing: If they only have $23,000 and go to that younger advisor, he's gone, because he couldn't afford to live on small annual fees alone. They don't have enough to work with me or anyone like me. So, good luck, tough crap. Buy some books on investing and taxation and college planning and tough questions and general financial guidance and family issues and whatever else you need help with. And if you're not comfortable with all of the above, sorry.

Is that really "in their best interest"?
.

Where does the Best Interest Contract Exemption fit in to your scenario?

As I understand BICE, it allows contracts in place to be grandfathered in, so for example if a 401K plan is based on A Shares that would continue, although the sponsor would have to receive full disclosure. Another pile of paperwork, no doubt.

Doesn't affect me personally, I'm fee-only, no conflicts of interest.
.

It allows those A share mutual funds to be sold to new investors once a full disclosure agreement has been signed.

Theoretically yes, but broker/dealers aren't going to allow the advisors to sell them. I've heard Edward Jones (by far the biggest player in A Shares) has already told its people to move towards fee-based and/or C Shares.

Look at it logistically: We can do these investments, or those investments. But if you want those investments, you have to sign this form. That puts an element of doubt in the process. I can't speak for Edward Jones and the others, but that's the vibe I'm getting. I have a (beer) buddy at UBS who says A Shares will be toxic there too.

I hear there's a line of lawsuits around the block on this thing, but I suspect it's a waste of time. Maybe at least a few rules will be relaxed. They could have done this far differently.
.

 

[Tehon]

Obama vetoes attempt to undo retirement savings rule

I have some time here to go into a bit of detail.

Up front, the law has some good qualities, I'm not saying that it does not. But it's another classic case of over-reacting to a problem and throwing the baby out with the bathwater. To wit:

The law is going to (1) cause further consolidation in the advisory industry because of increased regulatory administration costs, so The Big Boys so loathed by many who support this law are going to benefit. It's already happening, even though the law doesn't go into effect until next April and is not going to be enforced until January 2018.

The law is going to (2) leave smaller investors out in the cold because it won't be worth it to many advisors to work with them. This will mean that many investors who would also benefit from the investment, tax, college funding and many other services included in advisory relationships will be on their own. Sorry.

The law is going to (3) benefit older, established advisors because it's going to kill off AT LEAST 25% to 33% of younger advisors pretty much overnight. Those clients will have to go somewhere and obtaining them with the reduced competition will be easier. This, at a time when the industry is damn near desperate for young advisors.

Here's an example - remember, fees are the big deal, right?: Let's say we have a young family, Mom & Dad working hard and putting money into their 401K plans. They have accumulated $108,587 in those plans. They change jobs and want to roll those old plans into IRAs. They go to a younger advisor who offers to put them in American Funds A Share mutual funds, which charge a one-time, 3.50% up front load on those funds at that balance amount. They'd be using four excellent, Morningstar 4-star and 5-star rated mutual funds (let's say AMRMX, NEWFX, ABALAX, AWSHX), and the advisor and his firm would be responsible for managing the account. Over ten years, because they only paid the up front fee once, they would have averaged only about 0.40% annually in fees for their advisor (plus, I think, 12b-1 fees of about .25% per year, I don't remember). That evil young advisor, depending on his contract, would make a one-time fee of anywhere from $1,000 to $2,700 but would be permanently, legally responsible for that account.

Those days are gone. Poof.

So, they come to me, and I charge them my regular fee for accounts of that (smaller) size, 1.20% annually (and actually, I don't know that I would necessarily take them on). Plus, I'm making more annually, every year, as it grows. I'm using good funds, too, of course, but can I guarantee that they'd be better off than they would have been with American Funds? Nope.

So they're paying a ton more in fees over ten years than they had to, because of this law, with ZERO guarantee of better performance.

And one more thing: If they only have $23,000 and go to that younger advisor, he's gone, because he couldn't afford to live on small annual fees alone. They don't have enough to work with me or anyone like me. So, good luck, tough crap. Buy some books on investing and taxation and college planning and tough questions and general financial guidance and family issues and whatever else you need help with. And if you're not comfortable with all of the above, sorry.

Is that really "in their best interest"?
.

Where does the Best Interest Contract Exemption fit in to your scenario?

As I understand BICE, it allows contracts in place to be grandfathered in, so for example if a 401K plan is based on A Shares that would continue, although the sponsor would have to receive full disclosure. Another pile of paperwork, no doubt.

Doesn't affect me personally, I'm fee-only, no conflicts of interest.
.

It allows those A share mutual funds to be sold to new investors once a full disclosure agreement has been signed.

Theoretically yes, but broker/dealers aren't going to allow the advisors to sell them. I've heard Edward Jones (by far the biggest player in A Shares) has already told its people to move towards fee-based and/or C Shares.

Look at it logistically: We can do these investments, or those investments. But if you want those investments, you have to sign this form. That puts an element of doubt in the process. I can't speak for Edward Jones and the others, but that's the vibe I'm getting. I have a (beer) buddy at UBS who says A Shares will be toxic there too.

I hear there's a line of lawsuits around the block on this thing, but I suspect it's a waste of time. Maybe at least a few rules will be relaxed. They could have done this far differently.
.

but broker/dealers aren't going to allow the advisors to sell them.

Why not? Are A shares loaded with hidden costs that they don't want disclosed?

 

[Mac1958]

I have some time here to go into a bit of detail.

Up front, the law has some good qualities, I'm not saying that it does not. But it's another classic case of over-reacting to a problem and throwing the baby out with the bathwater. To wit:

The law is going to (1) cause further consolidation in the advisory industry because of increased regulatory administration costs, so The Big Boys so loathed by many who support this law are going to benefit. It's already happening, even though the law doesn't go into effect until next April and is not going to be enforced until January 2018.

The law is going to (2) leave smaller investors out in the cold because it won't be worth it to many advisors to work with them. This will mean that many investors who would also benefit from the investment, tax, college funding and many other services included in advisory relationships will be on their own. Sorry.

The law is going to (3) benefit older, established advisors because it's going to kill off AT LEAST 25% to 33% of younger advisors pretty much overnight. Those clients will have to go somewhere and obtaining them with the reduced competition will be easier. This, at a time when the industry is damn near desperate for young advisors.

Here's an example - remember, fees are the big deal, right?: Let's say we have a young family, Mom & Dad working hard and putting money into their 401K plans. They have accumulated $108,587 in those plans. They change jobs and want to roll those old plans into IRAs. They go to a younger advisor who offers to put them in American Funds A Share mutual funds, which charge a one-time, 3.50% up front load on those funds at that balance amount. They'd be using four excellent, Morningstar 4-star and 5-star rated mutual funds (let's say AMRMX, NEWFX, ABALAX, AWSHX), and the advisor and his firm would be responsible for managing the account. Over ten years, because they only paid the up front fee once, they would have averaged only about 0.40% annually in fees for their advisor (plus, I think, 12b-1 fees of about .25% per year, I don't remember). That evil young advisor, depending on his contract, would make a one-time fee of anywhere from $1,000 to $2,700 but would be permanently, legally responsible for that account.

Those days are gone. Poof.

So, they come to me, and I charge them my regular fee for accounts of that (smaller) size, 1.20% annually (and actually, I don't know that I would necessarily take them on). Plus, I'm making more annually, every year, as it grows. I'm using good funds, too, of course, but can I guarantee that they'd be better off than they would have been with American Funds? Nope.

So they're paying a ton more in fees over ten years than they had to, because of this law, with ZERO guarantee of better performance.

And one more thing: If they only have $23,000 and go to that younger advisor, he's gone, because he couldn't afford to live on small annual fees alone. They don't have enough to work with me or anyone like me. So, good luck, tough crap. Buy some books on investing and taxation and college planning and tough questions and general financial guidance and family issues and whatever else you need help with. And if you're not comfortable with all of the above, sorry.

Is that really "in their best interest"?
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Where does the Best Interest Contract Exemption fit in to your scenario?

As I understand BICE, it allows contracts in place to be grandfathered in, so for example if a 401K plan is based on A Shares that would continue, although the sponsor would have to receive full disclosure. Another pile of paperwork, no doubt.

Doesn't affect me personally, I'm fee-only, no conflicts of interest.
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It allows those A share mutual funds to be sold to new investors once a full disclosure agreement has been signed.

Theoretically yes, but broker/dealers aren't going to allow the advisors to sell them. I've heard Edward Jones (by far the biggest player in A Shares) has already told its people to move towards fee-based and/or C Shares.

Look at it logistically: We can do these investments, or those investments. But if you want those investments, you have to sign this form. That puts an element of doubt in the process. I can't speak for Edward Jones and the others, but that's the vibe I'm getting. I have a (beer) buddy at UBS who says A Shares will be toxic there too.

I hear there's a line of lawsuits around the block on this thing, but I suspect it's a waste of time. Maybe at least a few rules will be relaxed. They could have done this far differently.
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but broker/dealers aren't going to allow the advisors to sell them.

Why not? Are A shares loaded with hidden costs that they don't want disclosed?

I explained why not. A Shares are going to have a "bad name" (deserved or not) and the BDs are terrified of getting sideways with FINRA, the SEC, the Feds.

And yes, as I also mentioned, I think they still carry "12b-1" fees of .25%. What should have happened was they should have just been disallowed and mutual fund companies would have to have only the regular fees. Then they'd have to deal with keeping their costs down and being competitive.

But that's not nearly enough regulation.
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[Tehon]

These rule changes are a long time in the making. The industry has no one to blame but itself, yet the industry will ensure that the investors pay the price for their own lack of ethics and all the while blaming it on the government.

Edward Jones Agrees to Settle Host of Charges
Revenue sharing, called "pay to play" by critics, isn't illegal, but regulators are taking the position that failing to disclose such arrangements violates the law. California's suit alleges that by keeping the payments secret, Edward D. Jones broke a state law requiring brokers to disclose all the facts investors need in order to make informed decisions.

The suit alleges that Edward D. Jones received payments primarily in cash, but also from brokerage commissions stemming from securities trades that fund companies steer to brokers that market more of their fund shares. The arrangements, known as "directed brokerage," were banned by the SEC this year. As money managers, fund companies have an obligation to fund shareholders to seek the best prices in buying and selling stocks, and they aren't supposed to base such decisions on their own financial gain. The agreements were generally oral, the suit alleges.

The suit alleges Edward D. Jones had an incentive to favor funds that paid it, and that individual broker bonuses depended in part on how many preferred funds they sold. According to an internal e-mail enclosed as an exhibit to the suit, revenue sharing was a factor in drawing up "profit and loss," or P&L, statements for brokers, which in turn determine bonus size.