Rolling Back on Dodd-Frank

Rolling Back on Dodd-FrankIs regulation protection? Does it hinder productivity? Does it make dishonest people, honest? Could regulation possibly keep honest people, from being their best for their clients?
I think we could write a book on these four questions. Whatever happened to common sense, honesty, and a handshake? I hear many people asking, “What happens if the Dodd-Frank rules are reversed or rolled back?” For those who aren’t following this closely, the Dodd-Frank rules were passed after the financial crisis of 2008. Historically, policy makers have quickly passed legislation after each major financial crisis we’ve encountered since the Great Depression. A little over a month ago, President Trump signed an executive order requesting a review to determine if key aspects of the Dodd-Frank rulings, which regulate Wall Street and financial advisors, should be rolled back. So should they be rolled back and should you be concerned if they are?

I have yet to see regulation make dishonest or lazy people, honest or more productive. I do see regulation making it harder for those interested in entering the business. The rules, regulations, requirements of documentation, and the assumption by regulators that you are guilty until proven innocent has made it so that many talented, honest, hardworking young people have decided on a different path because of the obstacles they see ahead.

Should there be no regulation? No! But regulation for regulation sake is not what’s best for the consumer. Regulation often leads to more cost, lack of creativity, and a reduced ability to provide the client what they really need. It has become almost criminal to sell some products because of their complexity, but every product has its place. Every client has a different need. We are so focused on cost or complexity sometimes that we forget the value and benefit to the client.

How can someone who does not work in the financial planning industry believe they can make rules without understanding the client and the circumstances that surround that client? Unfortunately, rules for the masses are often bad for the individual.

Are there bad people in the financial services industry? Yes. When they are found they should be scrutinized and never allowed to practice, in any capacity, in the industry again. The same applies to all industries. But to assume that all financial planners and advisors are criminals is bad for planning, bad for the industry, bad for our economy, and most importantly bad for the individual client who desperately needs help to be financially healthy and prepared for their future.

Every client has their own individual unique financial DNA. The overlay of rules, on top of rules, on top of rules, to regulate the few criminals destroys the majority’s ability to be the very best for their clients. Reasonable regulation makes sense, but regulating 99% of the industry under the assumption that you will be able to stop the 1% who are unethical is nonsensical. Unfortunately, those who are unethical, and I believe it is less than 1% of the industry, will be unethical no matter what you do to stop them. So let’s stay competitive, creative, and with the ability to be the best for our clients.

So my advice for the vast majority of you who have good financial planners is to not worry about the regulation. Be happy that your planner is a person who will do his or her best no matter if they are over regulated or under regulated. They will do what is best for you because that is what is best for all of us!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.