On February 1, NAIFA-NYS sent the following Letter to the NYT Editor, objecting to a January 31 article entitled “The Depp Conundrum: Who Should Keep Tabs on the Money?“. The article (available HERE) ties Johnny Depp’s financial woes to an alleged need for the DOL fiduciary duty rule.
To the Editor:
Charles Duhigg’s extrapolation of Johnny Depp’s financial problems as a justification for the Obama-era fiduciary duty rule for financial advisors is a preposterous stretch. The supposition that somehow the nascent Trump administration would be to blame for any future Johnny Depps if it were to reverse course on this ill-advised regulation is equally specious.
From the outset, the piece speaks of transgressions of malfeasance and fraud; those are already against the law, and nothing in or around the proposed regulations would do anything in that regard. In this instance, it is a question of enforcement on either a criminal or civil level with tools already in the toolbox.
The greatest injustice emanating from the article is the insinuation that if the rule is not applied, then the financial-advisor world would continue to run amok. Financial advisors are already heavily regulated by both federal and state-based agencies, and are charged with operating in the best interest of the client. The rules proposed by the Department of Labor will impose additional burdens on financial advisors with no discernible benefit to consumers, who are already served by laws protecting them from the very things Mr. Depp is alleging occurred with his accounts.
As for the fiduciary standard being what protects a consumer from himself, Mr. Duhigg misstates the purpose of a fiduciary standard: it is to protect a consumer from self-dealing by an advisor or from actions otherwise not in the best interest of the client. It is not meant to save the investor from himself by imposing an affirmative obligation on an advisor to substitute a client’s judgment for that of the advisor. Investors always reserve the right to make bad decisions for themselves, or not follow the guidance of an advisor, even a trusted one working for that investor’s best interest. It is this kind of inflated interpretation of the rule’s purported benefits that has skewed the public discussion on it.
It is a nice try, but the world will not end when President Trump rightfully abolishes this regulation.
Larry Holzberg, LUTCF
17 Elk Street, Suite 3
Albany, NY 12207