August 24, 2010
Looking backward at performance is counter to the duties that I now have. I can only perform what the client asks. If I base my product solution solely on past performance, than what good is a statement like, "past performance is not a guarantee of future earnings"? If an investment is not able to be justified, then the regulation should take effect, which it does now with Suitability Requirements.
By placing a backward-looking fiduciary standard into the regulations, you will in effect remove agents from performing duties based on the client's needs, and only perform their wants, which is why there is such a problem in current 401-k plans.
These people ask their co-workers what to invest in, not professionals who have asked the clients what their needs are. Why limit the number of professionals giving advice with this rule instead of having more? A 35 year-old asking the advice of a 55 year-old co-worker is about as germain as a retiree asking his dog what to do with money to make it last through retirement.
Neither the 55 year-old nor the dog can make those decisions based on their experiences. The needs of a 20 year-old senior employee are different than those of his junior. And a dog can point to the performance section of a newspaper saying that the highest return is the best answer for everyone. But should a retiree be in a basket of international stocks, or in something safer?
According to your fiduciary rule, as opposed to the suitability rule, the retiree is more than okay, because the proposed rule looks backward at past performance. And, as mentioned earlier, past performance does not guarantee future returns or stability.