Guest Post: Robert Powell On The Spokesman For The Fiduciary Movement Who Is Now Accused Of Diverting Retirement Plan Assets To His Own Personal Accounts

Thursday, May 17, 2012 09:33
Guest Post: Robert Powell On The Spokesman For The Fiduciary Movement Who Is Now Accused Of Diverting Retirement Plan Assets To His Own Personal Accounts

Tags: advisor industry people | Dodd-Frank | fiduciaries | FINRA | regulation | RIA compliance | RIAs | yen

The U.S. Department of Labor, in a complaint filed yesterday in U.S. District Court, alleges an advisor used more than $3.2 million of the retirement savings of workers from multiple employers for personal expenses. No money is left to pay plan participants the benefits owed them, DOL says. Ordinarily, this sort of DOL release wouldn’t be big news. The DOL files dozens of complaints every year accusing advisers of diverting ERISA-plan assets for their personal expenses. But this DOL release this time didn’t feature a nameless and faceless adviser.

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This time the DOL is accusing a one-time spokesman for fiduciaries, a poster-boy for the fiduciary movement. This time the DOL is accusing Matt Hutcheson, a one-time champion of advisors lobbying to continue to be regulated as fiduciaries under the Investment Advisers Act of 1940.
Hutcheson, who in July 2010 testified before Congress about the need for all advisors to put the interests of their clients ahead their own, is accused of doing quite the opposite by the DOL. Hutcheson had previously been crimnially indicted but the DOL charges represent a new aspect of the legal proceedings against Hutcheson, and the DOL action yesterday is making me think about the implications of seeing yet another prominent name among RIAs engulfed in scandal.
It’s time RIAs acknowledge that it’s impossible to prevent an adviser – whether a registered representative or IA rep – from ripping off his or her clients. A crook is a crook, and they come under either regulatory structure, SEC or FINRA.
All advisers –fiduciaries or not – need to be regulated by a single agency. It ought not be FINRA; that agency has a vested interest in protecting the firms it reportedly regulates. It ought not be the SEC; that agency hasn’t done a credible job of protecting investors for decades. And it ought not be the CFP Board or state insurance regulators.
It’s time for a single regulator that oversees all advisers — insurance agents, stockbrokers, RIAs, hedge fund managers, and alternative investment sellers. And others. Maybe even include mortgage brokers.
Right now we have a system in which Americans often get different advice, different products, different everything from different types of advisers depending what licenses they hold, the designations they possess, and the regulatory body that oversees them. It’s just crazy. Other professions don’t operate that way. Doctors are regulated by one body.
There’s no good reason why advisers shouldn’t be regulated by one body. Having just one regulator will benefit everyone, most of all average Americans.
Right now, they don’t stand a chance when there are folks that could do what Matt Hutcheson is accused of doing.


Comments (2)

Who is Robert Powell?

I think the argument here is nonsensical. The reason why there cannot be a single regulator is because brokers, insurance agents have fought against the type of oversight the DOL has in place and seeks to strengthen.

Since 1974, the DOL under ERISA has a hell of a track record auditing fiduciaries via procedural prudence.

Let me get this straight - The DOL caught someone whose regulator was slack so we need a single regulator with less authority than the slack one?

Robert, I say we let FINRA regulate under the existing DOL procedural prudence structure. Will you join me in pushing this effort forward?

brentb843 , May 17, 2012
Further, the comparison to the medical industry is also nonsensical. Pharmaceutical sales reps are not allowed to call themselves doctors.

We have to first accept if we provide advice, then we need to be subjected to DOL type of scrutiny. If not, we have to accept the fact and quit saying that we are.

At the end of the 19th century, medicine was in the same place as we are today. Anyone could call themselve a doctor...Coke with cocaine was invented by a 'doctor.'

The AMA stepped up and only sought to set a standard for a medical profession - those who obtained an MD.

If our current political system had to address this today, the lobbyists for the drug companies would be creating a lower standard to keep their sales force on a level playing field with a doctor.
brentb843 , May 17, 2012

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