Get Shameless About Money

Replay: The govt is requiring advisors to have your best interests in mind, and people are mad about it: The New Fiduciary Rule

April 27, 2023 Brunch & Budget
Get Shameless About Money
Replay: The govt is requiring advisors to have your best interests in mind, and people are mad about it: The New Fiduciary Rule
Show Notes Transcript

Today on Brunch & Budget on Bondfire Radio, Dyalekt and I going to talk about something I feel very strongly about, something I’m appalled has actually caused controversy. We talk a lot on the show about how important it is to make sure your advisor has committed to being your fiduciary, which basically means they […]

Dyalekt:

Hey good afternoon and welcome to brunch and budget on bonfire radio with your hosts Pamela capellan, a certified financial planner here to help take the bite out of your budget brunch and budget.com. I'm your sound provider dialect and here's your host, Luca palate.

Pamela Capalad, CFP, AFC:

Thank you dialect and thank you everybody for tuning in. We are live in the studio today. And like we always always we're always live and we live in the city we live in the we're sleeping here right now know where we know we're awake currently. It's true. It's true. And we got we got tasty quiche engineering today awake,

Dyalekt:

but we're not conscious.

Pamela Capalad, CFP, AFC:

I bet I bet a little a little bell ring for that joke.

Dyalekt:

Says he's not here. I wanted to shout this out. Not a lot of people know this about conscious. But you know, when you hear the name conscious you think like conscious rapper he's all aware, you know, that's not actually the origin of his name. When I first met conscious out on the poetry scene, he was known as stream of conscious, which that's a completely different context. And you just call them out doesn't, there's no calling them out. I'm just though he performed on stages all over the place. It just when you meet him, now you hear the name conscious and you think of one thing. But then when you hear the origin that makes so much more sense for the type of cat. You're like Word,

Pamela Capalad, CFP, AFC:

shout out to conscious you're here even when you're not here. Gotcha. I love it. So today we are going to talk about something that is very near and dear to my heart. There has been a lot of controversy around this, the Department of Labor is putting out a new fiduciary rule. And this is something that we talked about a lot in the show the difference between someone who's a fiduciary, who basically has your best interests at heart and people who are required to do that and take the fiduciary oath. And then there are people who aren't necessarily required to do that, who only have to make sure that a product is suitable for you.

Dyalekt:

If you remember from gold being the mnemonic was to put the douche in fiduciary Yes.

Pamela Capalad, CFP, AFC:

Or to take the douche out of fiduciary right? Yes, fiduciary, these are good people. And so right now the Department of Labor is working on passing a bill through Congress that will expand the rule to apply to people who have retirement accounts and give them to investment advisors roll them over to investment advisor. So they're going to require that the investment advisor acts in the best interest of your retirement account. Now that sounds awesome, right? Yeah, sounds great. Yeah. Unfortunately, there is tons of backlash around it, people saying oh, it's gonna cost the consumer so much more. middle class Americans aren't gonna get the advice they need blah, blah, blah, or you don't even know. And then on the flip side of it, they're actually expanding the definition of fiduciary to include any person who claims that they're a financial professional giving and giving individual financial advice, such as David Ramsey, who has recently been on Twitter, saying this is going to ruin the middle classes ability to get advice. Also, he's he's spinning the same rhetoric, because his radio show that is very, very popular to number three Lists, Top Three, listen to radio show in the nation. And he gives individualized advice to callers. And if it's bad advice at this moment, there are no repercussions for David Ramsey. If he gives bad advice. Oh, that dropped right. There was nice,

Dyalekt:

yeah, drop down there just so you can get the real Yes, there

Pamela Capalad, CFP, AFC:

are no repercussions. Right now for five people who claim that their financial experts give you advice, the advice goes wrong. And you have no way to say hey, you didn't know what you were talking about. And now all my money is gone.

Dyalekt:

Yeah. And that's the thing changing that. Yeah. And we talk about that a lot on this show that how it's really important. If you're going to somebody for financial advice that they have, on their end, if they treat you if they do you wrong. There are some consequences for them. Yes, that's really important. If you got somebody who's completely unregulated, they can say whatever they want. It's true. Yeah. And they do there are tons of people out there and especially with the advent of the Internet and your mommy blog type things

Pamela Capalad, CFP, AFC:

and you know, people are saying about this. They're saying, this is a violation of free speech. Yeah, we're gonna have some words for that. But we do have an investment appetizer today. Oh, yeah.

Unknown:

Happy things happy. Yes. Have

Pamela Capalad, CFP, AFC:

you thinks we're going to talk about the difference between a bear market and a bull market?

Dyalekt:

Oh, that's always fun. Yes. Talking about that a lot right, the bear the bull and the bull thing

Pamela Capalad, CFP, AFC:

it is a stock thing and it is it basically is used to describe whether the market is up or down. It actually comes from the way that each animal attacks their opponent. So a bear markets when the market is going down a bear paws down at their

Unknown:

opponent, like in the revenue

Pamela Capalad, CFP, AFC:

and then I guess falls down on them. I don't know.

Dyalekt:

pop culture references that was a terrible movie. People loved it I think it's

Pamela Capalad, CFP, AFC:

Leo finally got his Oscar you

Unknown:

want to add one all the

Pamela Capalad, CFP, AFC:

other white dude talking about how he's saving Native Americans

Dyalekt:

were no he didn't you know the actual story from the revenue This is digressing like a mug but in the actual story that they got it from apparently he just wanted his gun back. But I guess the movie people was like very gonna be into it Leo just getting his gun back. But why don't we give him a little boy for him to save instead of No, no because yes of course because the low caliber had to die

Pamela Capalad, CFP, AFC:

immediately. Like immediately Sorry to ruin the movie for you. But that happens in like 20 minutes. But yeah, anyway, so yes, the bear like the bear in the Revenant a bear market, they paw down. So that's one of markets going down. And then a bull market is opposite. So bear a bull up here. Yeah,

Unknown:

it goes up,

Pamela Capalad, CFP, AFC:

it goes up. So you watch out for those. Keep up with it. That

Unknown:

is a that's a reach.

Pamela Capalad, CFP, AFC:

That's a real such a reach. That's just a thing.

Dyalekt:

You gotta have some other, you gotta have some dirty of meaning. I'm gonna I'm gonna look some some and they were like, it's because of bear paws downward?

Pamela Capalad, CFP, AFC:

Yeah, a bull with the torrents. So

Unknown:

what does it do? What does it what does that actually be?

Pamela Capalad, CFP, AFC:

Yeah. And so a bear market really what people are usually afraid of our bear markets and the idea of a bear market. It's not like, you know, seeing the market go down for a day or two or a month or whatever a bear market is actually it lasts for at least two months. So the market has been going down for at least two months. And it's gone down at least about 20%. And so this possibly sounds really familiar to what we talked about a couple weeks ago about a recession. And so recession is kind of a similar, they sometimes go together and they often do, but you can actually have a bear market and not have a recession. In fact, we are in one right now. So we people are saying that we might be entering a bear market. But we are not actually it's not nothing is indicating that we're entering a recession. So the people are just not necessarily competent in the stock market right now.

Dyalekt:

Well check this out. Like, I know, the basic stock market rule is buy low, sell high. Right, right. And if it's not a recession, which I understand like everyone's panic, because no one has faith in anything. If there's a bear market isn't that if I'm a purveyor of the stock market, and I'm just gonna be like, I'm gonna monitor these and see what the low point is. So I could buy in. Yeah,

Pamela Capalad, CFP, AFC:

the trouble with that is that it's really hard to predict what the low point actually is. That's what's that's a problem in general trying to time the market is it's really, you don't know what the low is. That's the whole point is that you don't know when it's gonna hit bottom until it starts going back

Dyalekt:

up. Right, right. Right. No, I feel that. But I mean, even then, like, you know, say you get in the game before it hits rock bottom. Don't we have a general understanding and faith and tell me if I'm wrong about this, because I'm not, you know, trading every day. But don't we have a general understanding that it's a roller coaster, and things tend to bounce back. So I would figure if we're in a bear market, and we're in like month, one and a half, I'm gonna go buy some stuff, even if it's not the lowest, I'm not getting the best deal. I'm a bi.

Pamela Capalad, CFP, AFC:

Totally Well, that's why we talked about dollar cost averaging a couple weeks ago to where you don't use your emotions, or what you see happening in the market. To decide how you're going to invest, you come up with a plan, and you say, I'm going to stick to this plan, no matter what the market looks like. And I will ride the roller coasters up and down with it. But I won't try and be like, Oh, I'm going to try and predict that it's a low. So I'm going to buy more and all of that kind of stuff.

Dyalekt:

Right? And I know that I'm an emotional human, and I'll mess up. But isn't that the whole reason why I go to somebody to do that? Because they're going to be able to take out all the emotion and just do that.

Pamela Capalad, CFP, AFC:

Yeah. So they are going to be the one saying, Hey, you should dollar cost average.

Dyalekt:

Gotcha, gotcha, gotcha. And is that what's happening is that I feel like that's not what happens in the bear market, then because it would always bounce back.

Pamela Capalad, CFP, AFC:

Well, I think that what's happening really, when the market goes down, it's just like, the whole, like, people just are like less competent in the stock market. There's other things going on in the economy and things like that, that do that.

Dyalekt:

Okay, so it's the other things that are keeping cats from becoming predators of the situation.

Pamela Capalad, CFP, AFC:

Yes, yeah. Yeah, totally. So that's, I mean, that's the that's the basic premise of a bear market. And again, it's a roller coaster, it's hard to really know what is causing the market to go down anytime. People always have their theories and their predictions, and you can read a bunch of stuff about it. But in general, we're just kind of in a place where it's like, okay, the stock market was up for a really long time. And now we're in a down cycle. Yeah, yeah. So that was your investment appetizer, bear market versus bull market. And now we're going to talk about David Ramsey and the new Department of Labor fiduciary rule. And the reason why I want to focus on David Ramsey, in particular, is because he was all over Twitter. And he got into

Dyalekt:

all over Twitter. That's why are well, he was popular on social media. So we're gonna Well, here's the

Pamela Capalad, CFP, AFC:

thing he's popular in general. And he is he's a really big name in the financial expert. He writes a lot of books. He has this weekly radio show,

Dyalekt:

right? And he's and he doesn't have any sort of financial credentials.

Pamela Capalad, CFP, AFC:

No, he doesn't. None at all. Not like No, nothing. He didn't go to like a money camp. No, no, no, no licenses, no financial credentials. And he tweeted, this Obama rule will kill the middle class and below the ability to access personal advice that was in response to a tweet by Representative Marsha Blackburn, a Republican in Tennessee, who slammed the rule as a one size fits all regulations. That means less access and higher costs her family seeking retirement advice.

Dyalekt:

Oh, a sucker. Just put Obama in front of a law and then make it a pejorative. Yeah, you notice that? This Obama rule, this is how you know that our president is black? Because that's what they used to do when something was bad. They put black in front of it. You have magic magic is awesome, right? Black Magic. No, that sucks. Got a hat hats are great black hat. You have bad guy. It's the same thing. Healthcare healthcare is great. Oh, you should care for Bhama care, right? This is?

Pamela Capalad, CFP, AFC:

Yes. So David Ramsey is saying this rule is going to mean people will not have access to financial advice and the reasoning for that in a lot of people's heads who are making these claims. Is that okay? So now that we don't get commission for selling people, these products, what is our incentive going to be to even talk to them? That's the whole thing is like, Okay, so now that we're not going to get paid secretly behind the scenes for this,

Dyalekt:

these guys want they get a fee based and need it to

Pamela Capalad, CFP, AFC:

Yep, basically. So just to break down what the new fiduciary rule is, I want to really explain it and give you guys an idea of like, all the different parts that are going on with it. There's a couple of different things going on.

Dyalekt:

Because I mean, from what the detractors are saying, it sounds kind of apocalyptic.

Pamela Capalad, CFP, AFC:

Yeah, I know. They're like, Oh, my God, no one will get retirement advice anymore. I don't use speech. The First Amendment is under fire. All this stuff is like going on.

Dyalekt:

I'm confused. It just sounds like it's more regulation. Right? That's all yeah, basically, which

Pamela Capalad, CFP, AFC:

of course, people think is like, who why do we need to regulate people, the government doesn't need to put their hand in this and you know, 2008, so tap

Unknown:

water drinking behind.

Pamela Capalad, CFP, AFC:

So basically, this is, this is like kind of the next step. So most people when they have investments, they're in retirement accounts are in 401, k's are in pensions, if you leave your job, then you most likely will roll it over to an IRA, or you leave it in your 401k, whatever. But for a lot of investment advisors, hearing that someone has an old 401 K means, oh, that means that I can access that money, put them into another retirement account that I can, you know, sell them a product into that's kind of the thought process of, you know, an investment salesman, and I'm gonna call them what they are, they're salespeople, at the end of the day, they can advise you on stuff at this point, but they're also trying to sell you a product. And that's the reality of it. I'm not gonna like, you know, like, beat around the bush there. So and

Dyalekt:

that's not it's something that's not always in their best interest. It's not like there's a rule when there, right should always sell that to folks. Right? You always have to look at the situation. Yeah, exactly.

Pamela Capalad, CFP, AFC:

So right now, what they what they're required to do is to make sure that whatever product they sell, you fit to your goals and your risk tolerance, so they can't sell you something that's super aggressive when you're like, Oh, I'm kind of afraid of the stock market. But they can, when faced with one face was showing you two products can show you the product that makes them more commission and not mention the other product at all. Because as long as the product is suitable for you, that's where the suitability rule comes in, then they they're not required to show you the other product, they're just required to disclose the fees of the current product. So with this fiduciary rule, it's actually going to limit the products that are allowed to show so that they're only being shown in your best and so they're only showing you products that are in your best interest. Okay, so that people are saying oh my god people you know, investors are we're limiting investors options by saying you can only show them stuff in their best interest. That's one argument. So you can only and well well

Dyalekt:

they only show and stuff that they best. That's man I know right? Sales many mad men ask,

Pamela Capalad, CFP, AFC:

isn't it? It's like dry was driving me crazy researching this and being like, wait a minute, so you're mad that you can only show people the stuff that's good for them and not show them the stuff that you know is worse for them. Like why is that? Why is that? Oh wow. So there's that. And the other thing that they have to do now is if they want to sell you a product where they get a commission, they have to have you sign they have to have you you sign a best interest contract. So the client has to say they have to sign a specific contract that says, I understand that this advisor is working in my best interest, even though he's getting paid a commission.

Dyalekt:

Okay. I like that. Yeah, that's anything that strengthens the bond of risk. Yeah. Between the advisor and advisor, the is what's up.

Pamela Capalad, CFP, AFC:

Yeah, totally. And so that's another argument that we're seeing right now is people are like, Oh my god, this is gonna cost so much more than for the consumer, because they're adding more paperwork and administrative stuff. And I'm like, really? That's why it's gonna cost more for the consumer because you have to sign an extra piece of paper disclosing that, you know, you're acting as their fiduciary. Really?

Unknown:

Yeah, cuz you know, more work is more money, right? Isn't that how life works? Paper

Pamela Capalad, CFP, AFC:

costs so much. So do electronic money on

Dyalekt:

paper? That's not true. They put money on cloth, but you know, yeah.

Pamela Capalad, CFP, AFC:

So and the other part about this is right now, this fiduciary rule only affects retirement accounts. And this is only for retirement accounts anyway. So it's not brokerage accounts. It's not anything that's held individually or as a joint or that you can only IRAs, it's only 401 K's it's only pensions.

Dyalekt:

And I mean, and if anybody needs more regulation to help them out in financial situations, it's seniors.

Pamela Capalad, CFP, AFC:

Yeah. And it's the people who, like I said, the peed the middle class people, most of their investment money is in a retirement account.

Dyalekt:

And people were just a shout out since we got we in season where people care about the politics, my anti regulation, folks who think regulation is just a bad thing. You understand that we have regulation for miners, because miners are not able to do all the things that they want to do for various reasons regarding biology. And the reality is seniors have been getting taken advantage of in financial matters by a number of scam artists from a number of angles. Yeah, as things have gotten more digital is becoming easier and easier. I was just hearing the story about a woman who was got a call a fake call from a granddaughter, they learned the granddaughters name and then call it up crying asking for money. Oh my gosh, ridiculous, then there's a number of statistical stuff to back this up. So if we need to look out for anybody in a regulatory manner, it's our seniors.

Pamela Capalad, CFP, AFC:

Yes, it is definitely the retirement stuff. So the other side of the rule, like I mentioned, is that they are going to say that financial professionals who even provide just one time advice, they're going to also be subject to the fiduciary rule in the fiduciary standard. So this includes if you're at a seminar, and you're giving a financial seminar talk or whatever, and someone asks you a question directly about you know, their own finances and you answer it then you're subject to the fiduciary standard. So you your advice has to be sound and you have to be like, I'm going to be accountable for this advice that I give you

Unknown:

should make your take that oath to what's that oath called?

Pamela Capalad, CFP, AFC:

Whoa, oh, the fiduciary Oh, yeah. Yeah, I mean, that's what I've taken. Right? So that's the thing is like, so weighed, having someone be accountable for what they say, is basically a violation of free speech is what people are saying about this.

Dyalekt:

That has been the argument when people have been complaining lately about their free speech being taken away. That's actually the argument they've been Yeah.

Pamela Capalad, CFP, AFC:

They're like I have to be accountable for the things I say that's a violation of my first amendment rights

Dyalekt:

even your like you hear your comedian who says like, oh, I want to say like racist or crazy or like specifically hurtful things. You're violating my free speech by not letting me say no, and nobody not letting you say this is you might get punched after your set. Yeah, which is the thing that can happen.

Pamela Capalad, CFP, AFC:

Yeah, you can say whatever you want. But especially in the case of a financial professional and someone who's saying their financial expert, you have to be responsible for it. That is your duty as someone who was put in this position so anyway, now that I'm all riled up we have to go to a song so I can calm down we'll talk more about this afterwards

Dyalekt:

all right all right. Well, we're gonna bring it down we're gonna be calm we got to have a song called fiducia by cat named benevolent out of Texas Yeah, yeah, it's gonna be alright check you in a minute brunch a budget by Fire Radio

Unknown:

make the transition the days behind me listen to my transform to a higher state from my wishes to optimise my prime most let myself only so I single with drama to the music cause to me, I never really gave a damn about throwing up a PC with this system and so not just thrown up so a whole cloth he said my mission, a character who setting plots cloud masks which writing books with no pay time with a zoom in and sees the players in haste. Many spaces suck into the voice of the face. Who couldn't pick a face because This case was racist Mossad chats in the boxing so the world says it's round shape to size this to the rest says south from search for the essence of this query, I conclude that man dominated man who was injured so why continue to cling to a lobe as heartstrings was the other heartstrings in another heart sings another horse canes were all other horses eat alone was hard seeing for another hard stream so I continue to click toward love as far as streams where the other heart scream and another heart sings another heart Skeens where other Hearts team of love was hard to sing for another. I'm the bringer of new voice life in the motion of peace of love twisted with the promise that is stolen. Most of Fantasy has picked the mindset of dreaming my skin has much feeling tattoo with much reason, a second abuse of windows so both sides can see them but roses in my harvest dead Lily so my feelings were too strong for the ears at a weekend I can speak softly Have you feel as if on the screen my existence of being separated from the usual eyes reflecting the pain in the voice that musical never could relate with what kills the rest in the state we lose the most again, the less that's just another way of doing evil, most top 20 the virtues of killing people achieve my heart closest so my idea is clear to the rest of the guests because they never checked the mirror. So we're continuing to click through a lobe as heartstrings with the other heart screens in another heart seeing another heart scenes where all of the heart scene Allah was hard seeing for another heart string and so I continued to click toward love as far as the strings with the other heart scream and another heart sings another heart scenes where other Hearts team Allah was hard to sing for another so why continues to click through a love his heartstrings with the other heart screenings in another heart sings another heart scenes were all of the heart seen Allah was hard seeing for another heart string so I continued to cling to what love as far as the dreams was the other heart scream and another heart sings another horse teens were other hearts teen Allah was hard seeing toy another was just a lonely superhuman with the conscience and the will to dream in the life of the conscious. And Lisa had taken the uniqueness hand of the search robotic system no heart for romantics accuracy, freedoms pain and horror leave one that's unique someone's calling the authorities and who meet well I'm just a criminal who murdered hatred and stole love to make military catered for jobs in the view by enemies taking this for granted while others miss you sanity one after another just killing your brothers you say God doesn't exist because pain paints our colors instead of pointing to the skies live with him yet as in I promise you'll find the main cause of their demise. Besides I don't believe love comes in explosions. How can that be created by something with no emotions? No emotions Navy's just

Dyalekt:

and we're back budget budget bonfire radio that was benevolent with fiducia refuting what family Cabella had to say about doing things with no emotions said no emotions. How is that possible? No. Maybe you just don't believe in love. Oh, come on. We all believe in love. So in other words, if you are looking for a good fiduciary, you need to find yourself a replicant or some other form of robot who doesn't believe in love, so that they can simply act in your best interest. Yes. Not the spambots No, they're not really for the best interest thing. You're the ones that said that they make 7000 a day. Online. They don't love you not though.

Pamela Capalad, CFP, AFC:

No, no, they don't. But they're not people. That's gonna say You know, we love you. We love you guys. We do we do so much that we are taking a fiduciary oath about it. Dang it.

Dyalekt:

Yeah, you know, those oats. It's, it's messed up because they feel tarnished these days. But I feel like they supposed to be when you Hippocratic oath and all that?

Pamela Capalad, CFP, AFC:

Yeah, well, and the thing is, like, I voluntarily took a fiduciary oath, no one's actually required to like sign an oath. It's something that is very much like in the financial industry, it's something that I felt strongly about. It's something that, you know, the network that I belong to XY Planning Network feels strongly about for all their advisors to sign something that literally says in writing, like I have your best interests at heart, as a certified financial planner, all CFPs are required to be fiduciaries. So there are people in the industry already, who have basically decided I'm going to take on this license. And that means I'm going to take on this responsibility to you, as a client and as an investor and say, Listen, I'm looking out for you. I've have the knowledge and the background, and I have your best interests at heart. And I think that that is really the bottom line and I don't understand how people can make arguments about it, but they found ways. So I do want to read PAUL RYAN, Speaker of the House, his personal stance or His official stance that is on speaker.gov about this Department of Labor ruling, he said, Don't be fooled. In reality, this rule would create more paperwork and record keeping requirements for planners, meaning higher costs for consumers. It would also mean less access and fewer options for small businesses trying to get up and running families trying to get up and running and families looking for financial advice. According to one independent analysis, up to 7 million current individual retirement accounts, wouldn't qualify for advice under these new standards for advice, and as a result, individual investors with small balance accounts likely will lose access to retirement advice and support. This is what the Speaker of the House said. Now, I don't know about you, but I know a lot of registered investment advisors who are under the fiduciary standard, who will gladly speak to somebody who has a small retirement account, and won't have to put it into a product for you. I know a home network of them, I know three networks of them, go to net four.org, go to the Garrett Planning Network, go to x y planning, they will all talk to you believe me, I've met some of them. So first of all, the fact that he's saying, no one's gonna want to talk to these people who don't have any money is bullshit word that no one's gonna want to talk to if you only have $5,000, or whatever number is in his head. That's crazy. What he's saying is, no one's going to try and come after you. Because they're not going to have the incentive to in the same way.

Dyalekt:

Yeah, that's that whole minimum wage argument. That's nonsense. If you raise the minimum wage, then no one's gonna hire anybody.

Pamela Capalad, CFP, AFC:

Yeah, that can't be possible. People still need to work, people still need people to work for them. So then they're saying it would also mean less access and fewer options for small businesses. And that comment is because small businesses are usually the ones opening the small 401, k's and the small pensions and things like that. Now, from my understanding of this rule, it sounds like that they are definitely going to have less options. Because all the crappy options, they will not be allowed to show them. You can only show options that are in the best interest of the client. So you can't show them the shady stuff. Yes, there will be less options. I agree with that. Paul Ryan, there will definitely be less options. And it will create more paperwork and record keeping requirements for planners,

Dyalekt:

I mean, but that sounds like stuff that they need to be doing. The whole thing about creating less options, there's a lot of there's a lot of weird brain psychology crap going on with giving people options. One of the things that people have paid attention to, you know, we complain a lot about our two party system is that if we were to have more parties, we might have a more difficult time getting together a president that's been shown in other countries. Yeah, there is an issue with you having too many options. You know, this, whatever store you hate, everybody got a store they hate because when they walk into it, they already don't care too much about it. And then there's too many options. And your brain just glosses over if you're not really a tool person, you go into that hardware store and there's a billion hammers of every shape and

Pamela Capalad, CFP, AFC:

tell me which hammer that literally happened to me at Home Depot. See, I literally looked at the hammer wall and I was like, oh my god, they all look the same even though I know they're not and I called someone over and he pointed to one and said that one and I said thank you sir.

Dyalekt:

Oh, by the way, oh, you get to roll with the companies that have who make the sucker hammers that hammer that hammer that if no one had advised you you might have ended up buying and then you hit the nail and exploded into a million pieces and started crying because it sent yet not a hammer.

Pamela Capalad, CFP, AFC:

Yeah. Well, because anyone can make a hammer. Well, anyone can remember.

Dyalekt:

This is the worst. Remember, y'all are the worst kind of companies and y'all don't need to exist. There's a problem with companies that already exist with like, oh, we we feel like we have a right to exist if you're a hammer don't hammer no nails. Ba Yeah. And that's all the relevant if, if your company does not help people out, then regulations will make sure that you stop existed. Yeah, look, the Acme arsenic company that make me used to make arsenic for just sprinkle on top of your cereal back in the day. They don't exist no more. It's gone. FDA, you know? Yeah, come on.

Pamela Capalad, CFP, AFC:

Do you like nah, food needs to be food Rudy's

Dyalekt:

to be food. And that's all that's happening here. I know it gets really, it gets really difficult, because advice can seem nebulous, and it's a confusing thing of what's true and what's correct and what's opinion and all that type of stuff. But really food just need to be food.

Pamela Capalad, CFP, AFC:

Yeah. Well, and I have to I, when I was doing my research and digging, I found some sanity and solace with Michael Kitsis. He is the advisors advisor. And he writes about a lot about the fiduciary rule and a lot about what it means to be a fiduciary Jerry, and one of the things that he said that I thought was really smart, is that the key distinction is to realize that just because it's a fiduciary standard, and it's more strict, doesn't mean that it will be more costly to enforce. In fact, he says, It may even be less expensive to enforce, because it's black and white. It's either good for you or it's not not, oh, maybe it's good for you, I have to disclose the parts that might not be good for you. We're just gonna gloss over that right now. This is good enough for you. And with the fiduciary rule, it's like, Yup, this is good for you. No, this is not no questions about it, you know. And the other distinction that I thought he made that was really smart. And that's why I wanted to really hone in on it is the difference between someone who's an advisor, and a salesperson. It's not about whether you speak to someone who's under the suitability rule or the fiduciary rule. It's about whether you're speaking as someone who's giving you advice, or someone who's trying to sell you something. That's the difference. And the distinction that people are making with this rule, they're saying, are you actually getting advice and then getting the product that you need to fit that advice, or someone trying to sell you a product so they can make money off of you? That's it. And the other argument that I really wanted to dispel is, is it going to cost more for the consumer, if they invest with someone who charges them, you know, 1% for assets under management, which is pretty average, or if they go with a commission based product. So I actually went to Finn rose mutual fund expense analyzer, and pick two mutual funds that were pretty similar. I picked the American funds growth fund a shares, which are front loaded mutual funds, which means that the Commission gets paid up front to the broker. And I also pick the Vanguard growth index fund investor shares, which doesn't have any fees associated with it, or any charges associated with it. So just to give you an idea, I put it in if someone invested $10,000, over 10 years, with the American funds growth fund that has the commission to the advisor, the total charges would be $1,337, over 10 years, right. So then we have the Vanguard growth index 110 $1,000 invested over 10 years, it would cost $292, no sales charge. And then if an advisor would charge you 1%, over 10 years, that would be about $1,000. So really, it's not costing the consumer anymore. Yeah. The advisor gets more money. The adviser in the first scenario gets $575 in an upfront sales charge, the advisor in the second scenario, charging 1% assets under management and putting them in a very similar fund gets $1,000 over 10 years.

Dyalekt:

Well remember, you know, the thing about the advisors, you know, worrying about losing money, the advisors weren't going to be the ones losing money. They're not the ones in this equation that are the ones with something to lose. It's like when you go to a psychologist, and or a psychiatrist, specifically, you go to a psychiatrist, and they immediately want to prescribe you something. Those guys are advocating for doing that. But those are not the guys whose whole livelihood are on the line. Right? It's the pharmaceutical company, right? We're lobbying. Yeah, American funds are the ones it's not the analysts, the analysts will complain about they losing money, but they're doing that because they are tied to these dudes. Yeah, those are the ones that are sweating.

Pamela Capalad, CFP, AFC:

Well, and the other part about the the, the Commission side of it is it's just way less transparent. So it's much easier to hide the fees and make it feel like the consumer is not really paying anything. Right now how many people are gonna how many people are going to run their mutual funds through the FINRA mutual expect mutual fund expense analyzer, which you can totally Google FINRA mutual fund expense analyzer, if you want to know how much it's costing you to buy the shares, it's really easy to do that, Google it, find the ticker symbol and throw it in there. If you really are curious, which you should be because it's really easy to do, versus having someone have to tell you, I'm going to charge you X amount of money every year. This is what it's going to cost. It's going to be there in black and white. Are you okay with that or not? You know, so I think that it's really just about how you're displaying the money being paid at the end of the day for the consumer. And so people can say, Oh, well, they're just gonna get charged more money. They're gonna it's gonna cost more for the consumer, we're gonna have to, we're gonna have to do more paperwork. They're gonna have to go through all these different channels and advisors are gonna have to charge them extra fees. It's like no, they don't. You're gonna make the same and they're Reality is what I've seen in this industry happening right now is a lot of advisors are moving away from commissions and towards the registered investment advisor model because they have more freedom they don't have to sell products their their income is not tied to commissions and it just means that they can actually serve the client better because trend is going this way anyway.

Dyalekt:

So you can do your job you can do your job actual job that's the worst thing about being any kind of creator of things or advisor to things or educator of things is when you also have to sell crap Yeah, anytime I've had a position where part of my job was selling some sort of product well I wasn't in that position long because it right it messes with your ability not only to be impartial but to be effective.

Pamela Capalad, CFP, AFC:

Yeah, totally. Well and that's that's the other thing too is like if you can't do it this way anymore. If you really care about the business that you're in you're gonna find another way to serve your clients if you're in it for the commission then you're in the wrong business right

Dyalekt:

this is what I'm saying. So you can be sales you can be a salesperson all day long yeah you could sell anything if you sales you sales yeah and power to all you people who salespeople love being sellers that's all good Yeah, but if you make it into and making do

Pamela Capalad, CFP, AFC:

oh my god people so Yeah,

Dyalekt:

can we can we can we can we go to a song and we go to a song it's feeling

Pamela Capalad, CFP, AFC:

okay, but after the song we're gonna go in on this first amendment argument

Dyalekt:

or you know, this is messing my brain we're getting a little too spaced out.

Pamela Capalad, CFP, AFC:

Can we go to a brunch break first?

Unknown:

We Oh, excuse me. Yes, let's

Pamela Capalad, CFP, AFC:

break so our brunch break today dialect and I actually have an announcement what? We got married last week. We did. We did did we did and our brunch break is actually a shout out to the New Orleans tattoo museum where we had our marriage ceremony. Wedding Ceremony, whatever you want to call it.

Dyalekt:

It's our wedding. Bad music. Good. We got a shout out shout out to Tasty Keisha and the birds with the wedding band music.

Pamela Capalad, CFP, AFC:

Yeah, I love it. I love it. So shout out to New Orleans tattoo museum if you are ever in New Orleans. They are an awesome tattoo spot. They actually are a museum. Adam the owner is a second generation tattoo artist. So his dad was a tattoo artist. And now he's a tattoo artist. They literally just like hooked us up. dialects got it awesome little

Dyalekt:

hooks they put them in our body. Yes, they did.

Pamela Capalad, CFP, AFC:

But they were just a class act all around. So if you need to tattoo New Orleans, if you're wandering around.

Dyalekt:

Oh yeah, we got to have two wedding bands that they performed for us simultaneously at the ceremony. While mama like saying home from Stephanie Wales from The Wiz. And by the time she was done singing home, they were done cutting

Pamela Capalad, CFP, AFC:

into our flesh. Yes. And now we have wedding ring tattoos that stuck in the dishwasher. You really can't so it's the No it's Nola tattoo museum.com If you want to check out we have a ton of art up there a ton of pieces. The museum is super cool. If you just want to know the history of tattoo making. It actually was illegal in a lot of places until the 70s.

Dyalekt:

Yeah, so when you think about how your parents are weird about tattoos, it's because they grew up with them being an illegal thing when they were kids. And you probably think the same way about a lot of drugs that are illegal now because you grew up with it being illegal. It sets stuff in your brain so forgive them for that.

Pamela Capalad, CFP, AFC:

Yes, totally. And now everyone has said it to including me. So there we go. So now we can go to a song Thank you know a tattoo museum for everything. You had a great time. Yes, yes.

Dyalekt:

Yes. Shout out to Nola tattoo Museum. Wonderful, wonderful, wonderful, folks. All right, now we're gonna play some music for you. This is some some bond family family and mine. I known this guy for a long time. DJ Rob flow featuring art Medina for tomorrow's weapons and sweepy it's called spaced out check in a minute. What's your budget by fire radio? Radio.

Unknown:

brainwaves will your system spaced out highs the Eagles the lifepoint put a thread through the needle blindfolded just like cutting people out just trying to eat but not the answer. Let's see Knysna with a crew of misfits always misconstrue because my views with their friends may be too futuristic. I spent apocalyptic rhythmic linguistics to the past only acident has mastered the kingdoms within the gods been manufactured kind of fake. It being fake to be worth it in my case. I wish no man no man, man in a no man's land You got to throw aways with command ability in in home messenger with the Success System System we wrap Tesseract Sita rush of facts that will go to the masses that a heavier acid all of the batteries in common unless we come off the dome exponents shown opposed they blown it man we own it the game is our real estate we in the song big, big ring two suicides in the middle of the pineal and humanized announcing the list of tactics half a mile long walk a mile long and the tribe is strong weed and boys ego white noise troubled me up WEB DuBois Helena Troy make a dough and donations to the girls in the boy scouts PRC word to my 30 day send you off like this Joe Methos was frantically like was on the basketball floor flow a nine year old watching the top brass and gotta brag about it ain't blocking the trash up him straight down blocks was in a long drive fans approve that the you peruse that things at home on New Jack heavy bring that back to us that true that constantly Alou casts 10 And on a dark side and a moon checking when a party and not even knocking that up folks been knowing the soul glow got the flow going choosing what's next up watching my folks growing we had the show so one goes flow Bill specters with a wall of sound and my stomping ground love to debate in the background but alpha beats but to track down my backhand down a win hands down system here

Dyalekt:

Yeah, yeah yeah welcome back. Brunch budget bonfire radio that is DJ Rob Lowe, featuring art Medina and sweepy are Perdita tomorrow's weapons, got that new job. Rob Lowe has been a dope, DJ and MC on the scene for some years now start us on labels doing some stuff with Kate Gaines, and sleep walkers and all sorts of fans to check out the stuff he's doing. And today, we talk about the fiduciary rules. It's like, it's like, I don't know you sports fans if y'all remember the Jordan rules, it was when the Detroit Pistons made it up as Michael Jordan was too good at basketball. So the Jordan rules was the rule was every time he came into the lane, you clothesline him like it was a wrestling match. Put him down. And that's what's going on today. Because right now we got all these untouchable mommy bloggers all up on the internet, given financial advice, and nobody's hand checking them. So what they say and right now is, you know, you've come with some bad financial advice you're gonna get put into the stands.

Pamela Capalad, CFP, AFC:

Yes. Okay. That's hilarious. I do want to clarify that you can give general advice, including mommy blogs, as long as you're not giving direct advice and telling someone, you personally need to do this. Well, it's the

Dyalekt:

educational thing, right? Yeah. If you've got a blog where you're giving overall education, and that is, yeah, I don't want to diss anybody who's done independent research and has their thing that they're putting out. But individualized advice is such a, well, it's more dangerous,

Pamela Capalad, CFP, AFC:

it is more dangerous. It's more dangerous. You're you're telling someone, hey, I'm helping you make this decision. And based on all of my knowledge of things and my knowledge of you, I think you should do this. That's what I do. That's what financial planners do. It's fine

Dyalekt:

to write your blog about what a healthy diet is. Yeah, but you don't know everybody's dietary restrictions. So if you were to give some individuals some diet plan and they're allergic to nuts, and it's chock full of nuts, well, that's your behind

Pamela Capalad, CFP, AFC:

his that is your behind a chock full of these images. I just love it. So I do want to talk about the other side of the fiduciary rule where they are actually going to start regulating financial professionals. That's what we're talking about right now. Whether or not it's one off advice or whatever it is, if it's individualized advice, then you will also be subject to the fiduciary rule and And the arguments I ever heard about this have just blown my mind. We've mentioned it a couple of times, and I'm still like, really, people are like, this is an infringement on First Amendment rights.

Dyalekt:

So I know we know it's not, but why is it not?

Pamela Capalad, CFP, AFC:

Okay. So here's the thing. David Ramsey can say whatever he wants to whoever he wants. The fact is, he is telling people and presenting himself as a financial professional. So he can say whatever he wants, but if he's giving people financial advice, he, like any other financial professional, should be subjected to be held accountable to the advice that he is giving. If he gives the wrong advice, then he should be responsible for the consequences, like malpractice. Yeah, like any doctor or therapist or attorney. Like, it's important to you and your life, like any profession, he should be accountable to the advice that he gives you, because he's telling you, Hey, I am telling you this, I know I'm right. I've studied all the things and done all the things and you're turning to me as someone who's an expert, and I'm telling you directly that you should do this. That's literally what he does on a show. Yeah, that sounds like he calls. Someone asked him a question. And he tells them, well, I think you should do this. So it's not like he's just generally educating the public. It's not like his books are under fire. And here's the other side of it is Dave Ramsey makes money off of his books, he also makes money off what he calls endorsed local providers. So he has thought about that. Yes. So he has actually a referral network, that he tells people yo put in your information into this site, he probably doesn't say, Yo, put your information into this site. And I'm going to connect you with someone in your local area. And they're going to help you with your finance stuff. So he has incentive to have people call him to give them advice, and then to send them to these people who are paying him a referral fee for being a part of his network. So you're getting paid on both ends there. So he's getting paid, even though they can make the argument that oh, he's giving out free advice to these people who call in he's not charging them. He's getting paid. And that's that's the main twist with this fiduciary rule is if you're getting compensated in any way, for giving financial advice to somebody, it doesn't have to be the client giving you the money directly, then you are subject to the fiduciary standard period. Because I

Dyalekt:

mean, it's a conflict of interest right there straight up in the most strict definition. Yeah.

Pamela Capalad, CFP, AFC:

So he is someone and people I don't understand where this turned into a free speech conversation at all. But it has, like, here's here's the craziest part. So this guy from the American spectator, John verlo, he started his article with it's so sad that 40% of millennials favorite government banning speech they seek they deem offensive, take speech about personal finance, for instance. Wow. So he said he basically equated someone speaking offensively or speaking hatefully to someone giving financial advice. Also,

Dyalekt:

none of these rules have you getting arrested. Oh, you punk as non fiduciary no need to be under fiduciary rule. Ain't nobody putting your bond in jail. So there's no freedom of speech issue going on. Yeah, so gulags,

Pamela Capalad, CFP, AFC:

no, oh, my God. So all of this stuff is like, I don't even know how to respond to this. But here's the thing. Here's the thing, again, a beacon of sanity Michael Kitsis. This is this is like the ideal if if we took fiduciary rules to an extreme. This is what it could look like. So for instance, let's say you're an insurance agent, dialect,

Unknown:

insurance agent,

Pamela Capalad, CFP, AFC:

you're an insurance agent, you sell insurance policies. And someone he's like, he's like making it rain with the insurance policies. So someone comes to you, and they want to buy an insurance policy, and you show them the benefits of the various insurance policies that you're selling. And they ask you, but is this the policy? That's right for me?

Unknown:

Right, right, right. And you say, Well, this is the policy that is right for you, of course,

Pamela Capalad, CFP, AFC:

no, but under the fiduciary rule, you might actually have to get to the point where you say, sorry, I actually can't give you advice on that. You have to talk to your financial planner, you're just selling the policy, and saying, here's all the awesome stuff about this policy. But when a client asks you, is this the right policy for me? Because you're incentivized to sell the policy. You can't tell them yes or no,

Unknown:

that sounds great.

Pamela Capalad, CFP, AFC:

Doesn't that sound awesome? I mean, it's like you have to go and talk to your unbiased financial advisor who has your best interests at heart. Instead of asking me who is incentivized to sell you something?

Dyalekt:

I do have to say it does sound annoying to me, but I'm not unlike many others. Taylor's who also have to go through that kind of thing? Yeah, I mean, yeah, you know, I got to talk to somebody, I want to go buy a new stereo I go down to BestBuy. And I'm like, so which one do you think is the best stereo? And whenever I talked to them, they say, Well, I can't actually tell you, which is the best stereos, you have to talk to your wife first.

Pamela Capalad, CFP, AFC:

She's taken the fiduciary Oh.

Dyalekt:

I understand. It's a little bit of extra more work, but it's better for the consumer.

Pamela Capalad, CFP, AFC:

Yes, exactly. So that is what it could look like. In a beautiful world. We're not even there yet. We're honestly just talking about retirement accounts. And the financial professionals who are saying I can give you advice because of whatever reason

Dyalekt:

again, yes. Stop trying to screw over old books.

Pamela Capalad, CFP, AFC:

Yes, old folks. And people honestly, like the financial world is so complex young retirees out there? Well, I mean, anyone, the financial world is so complex. And this is why we try and like unpack everything. And why it takes an hour to do it is because there's so much going on, like, look how confusing bear and bull markets got. And that doesn't even really have anything to do with your personal financial life, honestly,

Unknown:

nothing to do with it and found no it doesn't.

Pamela Capalad, CFP, AFC:

So when it comes down to someone actually giving you advice and telling you, yes, you should do this. No, you should not do that. Then, why is it not a given that they have your best interests at heart? Yeah, that's all this rule is trying to do. And it's baby steps.

Dyalekt:

And one thing for finance folks is really about that. This is really hugely important. People trust doctors to this day, my new doctors are going through some of the same issues where a lot of them are salespeople, and a lot of them are asked to do things that they don't agree with and all that stuff. But because of the Hippocratic oath and the regulations that they have gone through for years, we still have a lot of faith and belief in them. What industry does no one trust or believer think is a real thing is finance. Yep. Everybody has a negative. I mean, not everybody, but so many people have a negative opinion of finance. And if you want to and as many financial advisors have said they want to rehabilitate that image. This is a giant step in that direction. Yes,

Pamela Capalad, CFP, AFC:

totally. And here's the thing. It's your choice, whether or not you want to be under fiduciary rule, because here's the thing, you don't have to be giving financial advice. So one other line that I just have to say for Michael Kitsis is, if you don't want to be treated as a fiduciary, that's fine. Just don't offer yourself. Just don't offer advice. And don't hold yourself out as someone who gives advice. If you if you do you no one's stopping you from selling these products. Right,

Dyalekt:

right. I want to say, to continue our analogies if you have a YouTube show, where you review video games or whatever, and you don't like it when someone doesn't like your assessment of the new Fallout game, and you start complaining they're taking away your right to free speech and you don't have to review that game. No one asked you if they was gonna play it anyway. Yeah, if you have a desperate need to tell people how you feel about the new Fallout? Well then maybe used to register with somebody. Exactly. I don't know if there was a video game fiduciary standard equivalent, but maybe there should

Pamela Capalad, CFP, AFC:

I think the stakes are a little lower. I mean, I could be wrong. Like the

Dyalekt:

end of the video game is the fate of the world because you're right.

Pamela Capalad, CFP, AFC:

You're right. What could what could be more high stakes in that. But that's the bottom line is like if you don't want to be held to a fiduciary standard, you don't have to be you just can't be giving advice. So these are the rules. If you want to give advice you have to be held to a fiduciary standard. If you don't want to be held to that standard. Don't give advice to the end you can't make I don't know how much simpler it could get. No one is forcing you to do anything. No one is telling you not to give advice. No one is taking away your first amendment rights. They're just saying Yo when you say something and it affects someone else, you kind of have to be responsible for it you know that's it.

Dyalekt:

Yeah, you know just say if you see something say something no no don't forget that if you say something mean something and have stuff to back to them. Oh, that's so no just would it be WAY longer anyway you know, we don't get out of here.

Pamela Capalad, CFP, AFC:

Oh, and if you are listening on iTunes and you liked the show, please leave a comment if you find the info valuable and subscribe and helps more people find us. Thank you so much for listening hashtag money needs money

Dyalekt:

needs be and subscribe to all of the shows on Wi Fi radio. We have a billion of them and they keep on expanding.

Pamela Capalad, CFP, AFC:

Yeah, tek me aims about taking their 500 500 shows. I can't even imagine

Dyalekt:

man. I don't even know 500 people. All right, we'll leave you off. We're gonna go to France. I was like the I'm friends yeah we're we have the shiko shiko band with the fiduciary finale to end it off here a bunch of budget by radio thanks check it out next week?

Unknown:

charge of all