5 ms·

The Fees and the Darkness

dsr_ 9y ago
When people ask me about the fiduciary rule, they are usually shocked to discover that this hasn't always been in effect. It's a basic anti-corruption rule.
hamstercat 9y ago
I don't understand how a financial company can charge an arbitrary amount (of their choosing) if the fund is doing well. How can anyone trust them to not take an absurd amount if the advisor is crooked? I guess if every financial business does it you have no choice as a customer.
- vinceguidry 9y ago
  It seems like the idea is that a hurdle is guaranteed to be met by the financial firm, and, so long as that hurdle is met, everything else is gravy. The firm could choose to take everything over the hurdle or share the surplus with the client for goodwill boost. It's not so much a charge as a bonus. It would look like a good deal to the client, who gets legibility and reliability, and for the firm, which can get a reward for its efforts.
matt4077 9y ago
This is such a beautiful example of the anti-regulation fallacy that so many people for some reason believe in. It's beauty is in that there is literally no argument against the rule, except the vague notion of "freedom", which in this case means freedom to violate the rule which... "...demand that advisors act in the best interests of their clients, and to put their clients' interests above their own. It leaves no room for advisors to conceal any potential conflict of interest, and states that all fees and commissions must be clearly disclosed in dollar form to clients." I bet almost everyone would have expected this to have been the law all along–in fact I don't quite understand why it wasn't fraud before to give suboptimal advice while collection undisclosed kickbacks. For any advisor conducting his business with a modicum of common decency, nothing changes (except that it will become easier to compete ethically when everyone is playing by the same rules)

dsr_ 9y ago

When people ask me about the fiduciary rule, they are usually shocked to discover that this hasn't always been in effect. It's a basic anti-corruption rule.

hamstercat 9y ago

I don't understand how a financial company can charge an arbitrary amount (of their choosing) if the fund is doing well. How can anyone trust them to not take an absurd amount if the advisor is crooked? I guess if every financial business does it you have no choice as a customer.

vinceguidry 9y ago
It seems like the idea is that a hurdle is guaranteed to be met by the financial firm, and, so long as that hurdle is met, everything else is gravy. The firm could choose to take everything over the hurdle or share the surplus with the client for goodwill boost. It's not so much a charge as a bonus. It would look like a good deal to the client, who gets legibility and reliability, and for the firm, which can get a reward for its efforts.

matt4077 9y ago

This is such a beautiful example of the anti-regulation fallacy that so many people for some reason believe in. It's beauty is in that there is literally no argument against the rule, except the vague notion of "freedom", which in this case means freedom to violate the rule which... "...demand that advisors act in the best interests of their clients, and to put their clients' interests above their own. It leaves no room for advisors to conceal any potential conflict of interest, and states that all fees and commissions must be clearly disclosed in dollar form to clients." I bet almost everyone would have expected this to have been the law all along–in fact I don't quite understand why it wasn't fraud before to give suboptimal advice while collection undisclosed kickbacks. For any advisor conducting his business with a modicum of common decency, nothing changes (except that it will become easier to compete ethically when everyone is playing by the same rules)