“Good laws make it easier to do right and harder to do wrong.” William Gladstone
Financial predators posing as investment advisors prowl New York State with little oversight.
This might change – sooner rather than later.
The NY State Assembly proposed Bill A2476 – aka The Investment Transparency Act.
While not perfect, it should put a chill down the spine of annuity salespeople and their like lurking in the dark corners of teachers’ faculty lounges.
The bill targets non-fiduciary investment advisors. These individuals call themselves financial planners, retirement consultants, wealth planners, and other misleading terms. These titles disguise the fact they put the sale of a product over the needs of their clients.
This will change if the bill becomes law.
It requires non-fiduciary advisors to follow new procedures, cutting into their commission streams.
Financial salespeople will be required to create a plain language disclosure orally and in writing clearly stating the conflicts of interest inherent in their conflicted model.
“I am not a fiduciary. Therefore, I am not required to act in your best interests and am allowed to recommend investments that may earn higher fees for me or my firm, even if those investments may not have the best combinations of fees, risks, and expected returns for you.”
IMHO, if someone agrees to this zero-sum arrangement, they get what they deserve.
Salespeople must maintain a signed client copy along with any other written client agreements.
If the protocol is violated, the Attorney General may impose civil penalties.
This is a direct frontal assault on the suitability standard.
“Simply put a suitability standard allows brokers to put their own interests, or their firms’ interest, before the customer’s bottom line.”
This doesn’t eliminate the sale of commission-based investment products. It helps level the disproportionately tilted playing field through education.
The bill sums this up in its conclusion:
“While individuals should be able to choose whatever investments suit their particular needs – including, potentially, higher fee investments – those decisions should only be made with all available information, including whether and to what extent their broker will benefit from a particular investment choice.”
Our allies in the New York State United Teachers played a major role in this undertaking.
Public school teachers’ non-ERISA 403(b) plans in New York State are the epicenter of financial exploitation.
Morningstar points out the national disgrace in this arena.
“One aspect of the product delivery system devised by insurance companies is to turn loose pizza-peddling salespeople on educators in school lunchrooms and ambush them. These peddlers of some of the worst financial products devised by humanity pose as “financial advisors” to offer seemingly “free” products whose real costs are hidden (and therefore high) in the fine print.”
ALL New Yorkers (and everyone else) deserve better than this.
Sometimes the turkeys shoot back.