Don Trone, often referred to as the "Father of Fiduciary," testified at a Department of Labor hearing on Thursday that its proposed fiduciary rulemaking would have failed to stop famed Ponzi schemer Bernie Madoff, and that more fiduciaries than brokers have stolen money from investors.
"I think research will show that over the last 15 to 20 years, fiduciaries have stolen more money from investors and retirement savers than brokers," Trone, who has been steeped in fiduciary endeavors for the past 30 years via his founding of the Foundation for Fiduciary Studies, as principal founder of fi360, and now as head of 3ethos, told DOL executives. "Bernie Madoff was subject to a fiduciary standard, and, if he was here today, I think he would say that the department's proposed rules would not have slowed him down."
Trone told the DOL execs on the last day of Labor's hearings that he opposed their plan to amend the definition of fiduciary under the Employee Retirement Income Security Act, and that DOL "cannot simply wave its regulatory wand and make every advisor a fiduciary."
Advisors, he said, "need at least five years of industry experience and additional training on fiduciary best practices before the person can judge wisely and objectively–which is what is required to serve in a client's best interests."
DOL's plan "is not a fiduciary standard, but rather punitive rules," Trone continued, adding that the proposed plan is "going to make it easier for bad advisors to hide behind the complexity of the rules, and make it harder for honest advisors to provide their services."
The plan will cause the "greatest harm" to small retirement plans, retirement savers with small account balances, and small retirement advisory firms, he argued.
Trone argued that as it stands now, there are "17 fiduciary best practices currently substantiated" by DOL regulations. "We cannot tell from the DOL's proposal which of these best practices are going to stay or go, or what practices are going to be added," Trone said. "Until the practices are identified, no one can make an intelligent comment on whether the proposal is an improvement; what the cost is going to be to deliver the fiduciary standard to savers; and, what additional training will be required of advisors."
