We reached out to Anthony Scaramucci on Wednesday and invited him to discuss his recent remarks regarding the DOL fiduciary rule in a webinar. At the time of this writing, we have not heard from him or his office, so can only conclude he has chosen to decline the invitation. [After this blog was published, Knut Rostad said Mr. Scaramucci's office contacted him, expressing interest in debating the issue.
InvestmentNews will relay the details of such an event once it is scheduled.]
The remarks of the Donald Trump adviser and SkyBridge Capital executive on the Labor Department's fiduciary rule are so at odds with the DOL rule, law, logic and basic human decency, they demand a rebuke. Equating established notions of fiduciary restraint with the deplorable institution of human bondage — suggesting that serving clients' best interest amounts to slavery — is beyond the pale.
The remarks were
reported in InvestmentNews on Tuesday.
Mr. Scaramucci asserted that the DOL “has made a decision to discriminate against a class of people who they deem to be adding no value … judging what should happen in a free market and attempting to put advisers out of work.”
The logic of Mr. Scaramucci's remarks is not just off base, it's upside down. The DOL rule generally applies a fiduciary standard to both classes of financial advisers: brokers and registered investment advisers advising on retirement accounts. It increases fiduciary protections to one of the most vulnerable segments in society: retirement investors. Further, it permits a broker or adviser to continue offering conflicted advice if, and only if, the conflict can be mitigated and any higher costs can be justified to be in the best interest of the client.
(More: The most up-to-date information on the DOL fiduciary rule)
Consequently, the DOL rule “discriminates” — not against a “class of people” — but against a “class” of conduct and practices that result in conflicts and higher costs. And research indicates beyond a doubt that institutional and retail investors increasingly reject unjustified higher costs.
The DOL rule, then, simply reflects the demand of the market place, rather than either overriding or steering it.
Mr. Scaramucci's rhetoric, particularly at a moment when so much negative discourse fills the airways, either speaks to where language standards have landed in 2016, or that his remarks are a one-off mistake.
Mr. Scaramucci has a choice. He can overlook the terrible nature of his remarks and do nothing, or he can reconsider them and apologize. The latter would be the easier route. Recognizing he erred in raising the specter of slavery should not be a hard decision. He should apologize to advisers who work to help investors retire with dignity. He should do so not just for his own good but for the good of those who work diligently and honorably in finance — as well as for the good of young people who may be considering career options in finance and financial planning. The young people in his firm and in his life who look to him for guidance may appreciate he do so as well.
Knut Rostad is co-founder and president of the Institute for the Fiduciary Standard.
