The ‘Cost’ of Fiduciary: Those Wacky Folks at NAIFA Are at It Again

In response to these curiously escalating costs, only 39% of NAIFA advisors said they would increase prices to clients, while 35% said they would "offer a more limited range of products." Perhaps I'm missing something there, but that means 61% (or nearly 2 out of three) respondents wouldn't raise client fees: doesn't this undermine the whole "increased client costs" argument? And where's the threat in insurance agents going back to focusing on insurance products?

According to NAIFA, the biggest threat posed by having to put clients' interests first is that 46% of their "advisors" "would most likely shift their customer mix to higher-income clients." As if. Now don't get me wrong: I know that there are many dedicated advisors around the country who focus on serving the "middle market," including the members of Garrett Planning Network. With that said, it's been my observation of the advisory world that there's a lot more to attracting "higher-income clients" than simply "shifting" one's "customer mix." 

Yet despite these highlights, the most amusing part of the NAIFA survey is the whole idea of it. Suppose someone introduced legislation that would stop gas stations from watering down their gas (I suspect this is already illegal, but work with me here). So the National Association of Watered Down Gas Stations—NAWDOGS—conducts a survey of the owners of gas stations that water down their gas, and guess what? A majority of them say that being forced to stop watering down their gas would raise gas prices. Would anybody be shocked? Would anyone believe them? Would it affect the legislation?

Point is, a standard that requires retail advisors to put their clients' interests first is not about costs: It's about protecting investors. Last time I looked, that is the SEC's #1 job. Much as I appreciate NAIFA's contributions to levity, perhaps Dr. Waters should listen to her own words, and join the legion of professional advisors who know that not only is putting clients first less costly, it's also the right thing to do.