Fight to protect consumers from bad investment advice advances slowly

The fight to protect consumers from bad investment advice has been a multi-year saga.

At first blush, it may seem a losing battle: In March, a judge struck down a Massachusetts rule that aimed to clamp down on unscrupulous investment brokers. The holy grail for consumer advocates — an Obama-era U.S. Department of Labor rule to protect retirement investors — also died in court in 2018.

Since then, consumer groups have bemoaned a lackluster roster of federal and state oversight.

A number of them say recent measures from the Securities and Exchange Commission and National Association of Insurance Commissioners — which outline rules for brokers to give financial advice that’s in the “best interest” of clients — are basically straw men.

However, there is broad disagreement on this point.

NAIC President Dean Cameron, for example, said its measure was “bipartisan” and a “significant advancement” for retirees. And proponents of the SEC rule call it a monumental leap forward, the culmination of a Dodd-Frank Act directive in 2010 for the regulator to study more stringent rules for brokers.

In addition, many financial industry players who fought the Obama-era advice rule thought it would have negative effects for consumers.

“I think we’re in a much better place with the receipt of investment advice for investors,” said Lisa Bleier, associate general counsel at the Securities Industry and Financial Markets Association (SIFMA), a trade group that represents brokerage firms.

Meanwhile, many legal experts acknowledge that there has been positive change for consumers, despite the debate over how quickly reforms have happened and a granular focus on wins and losses.

“It is two steps forward, one step back,” said Fred Reish, an investment-advice expert and partner at the law firm Faegre Drinker Biddle & Reath. “But if you ignore those back steps and look at this over a five- or 10-year period, the trend line is definitely toward greater protection for investors, and [especially] for retiree investors.

“You can see a better world developing in the marketplace,” Reish added.