Today’s Wall Street Journal carries a sharp criticism of President Obama’s plan to reform retail investing. The piece called “Obama vs. Savers” highlights the restrictions that the proposal will place on investors. Since Freedom Benefits is focused on consumer education and charges neither commissions nor asset-based investment management fees, you would think that we support the proposed legislation. The bulk of social policy advisers we respect and follow on social media do support the President on this reform initiative. If the only intent of the reform is to take aim at broker’s commissions, then why would we be opposed? Certainly the President’s proposal has the potential to boost business for the relative handful of consumer financial advisory firms (like ours and other CPAs) that do not follow the two traditional compensation models that dominate retail financial services.
Freedom Benefits has always supported free market options that allow more consumer choice and promote higher level of consumer education. The Obama plan seems to concede that consumers can’t possibly match the wit and wiley of financial services firms to extort money so the government needs to protect them. It is a defeatist attitude.
There are two other more significant problems with Obama’s thinking:
1) everyone associated with investment service gets paid for their work in one form or another regardless of the rules or business model. There is no compelling case to show that one model is better than another.
2) I can’t cite a single example of when increased government regulation has actually had a net benefit for consumers. The unintended side-effects of regulation would almost certainly outweigh the intended benefits.
In this case, Obama would be best advised to follow the decisively non-executive Buddhist mantra “Don’t do something, just sit there“.