Monthly archive

August 2016

I’ll have a BICE Lite with lime please..


Raise your hand if you are a Financial Advisor (RIA or B/D) and you know what BICE stands for.

How many of you can explain the difference between BICE and BICE Lite?

I have read everything I can get my hands on these last three hours and I still would need to enter the test room with the answers written on my palms.

It is mind bendingly confusing, but don’t worry, the government has prepared a 1,000 page document to help clear it all up for you.

Law firms are salivating over the inevitable avalanche of litigation. I am sure Brian Hamburger’s and Ross Intelisano’s phones are ringing off the hook: “HELP!!! I need BICE immersion. Help me protect myself! My clients have all lawyered up, can I retain you NOW even though I haven’t been sued yet?”

BICE stands for Best Interest Contract Exemption, also generally referred to as the “DOL fiduciary rule”.

The United States has 70% of the world’s lawyers. You will need not wonder why as soon as you imagine the inevitable litigation resulting from the new DOL rules governing financial advice for qualified retirement accounts. How many trillions of investor dollars does this rule impact? North of TEN!

I have to admit I never understood what all the fuss was about, until recently. The rules begin to go into effect in April 2017, aka very soon, and I have been forced to develop a working knowledge.

I can only imagine how many attorneys the wirehouses tasked with writing and implementing the necessary policies to protect their financial advisors from the ambulance chasers who will be advertising on late-night TV.

At the risk of being sued for giving Financial Advisors advice I will live dangerously. Sarcasm to follow:

If I were a financial advisor I would inform my ERISA clients that they should find a new FA (perhaps they could call Betterment or Wealthfront and speak to an artificially intelligent robot who has no conflicts and no inclination to over charge or under deliver. Good luck suing a robot).

I would tell my clients that the government just announced that all I have been selling them is merely “suitable” securities when in fact I should have been acting “in my clients’ best interests”. Hopefully that admission doesn’t trigger a lawsuit.

I would also explain to my clients that the government is now mandating that I earn “reasonable compensation” and since I prefer UNreasonable compensation, I am going to need to fire them.

And since I can no longer make “materially misleading statements” it simply isn’t fun anymore.

I would then explain to my client that I am a Financial Advisor, with an o, and they would probably be better served by a Financial Adviser, with an e.

I would obviously need to apologize at that point because I thought advisor had two synonymous spellings, like theatre and theater. Nope! Knot true!

FINRA explains it all on their website; see section titled “Choosing an Investment Professional” to explain how , let me quote FINRA: “the term financial advisor (with an o) is a generic term that usually refers to a broker”. If my client was still confused I would make sure they saw the sentence that reads: “By contrast, the term Investment Adviser (with an e) is a legal term that refers to an individual or company that is registered as such with either the SEC or a state securities regulator”.

Got it? Adviser with an e, GOOD. He or she doesn’t steal from you because they answer to a more legitimate authority. Oh wait, maybe that wasn’t what FINRA was saying?

The lawyers are in charge my friend. All 1.3 million of them.

Jeff Jacoby of the Boston Globe sums up America’s predicament perfectly, in his 5/9/14 article titled: US legal bubble can’t pop soon enough: “Anyone can be sued for anything, no matter how absurd or egregious…..the rule of law is essential to a free and orderly society, but too much law and lawyering makes democratic self-rule impossible, and common sense legally precarious”.

I could not have said it better myself.

Author’s note: if you want a quick overview of the rules, Greg Iacurci wrote a great article in Investment News on 5/17/16 titled “Two sides of the DOL fiduciary rule’s BICE advisers must understand”.

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