The White House said the proposed regulations would allow financial institutions
to give workers advice on investments if they follow one of two rules:
•Advisors are not compensated for steering workers into investment choices that are more profitable for financial institutions.
•The advice is based on an objective computer model that has been certified by an independent expert.
The White House said today that the proposals would affect tens of millions of Americans and will apply to all financial institutions that both provide investment options such as 401(k)s to employers and offer financial advice to employees.
There is definitely something to these regulations. Mutual funds and other investment vehicles often pay varying fees to the investment advisor and there's no question that this corrupts the process.
At the same time, implementing such regulations is not all that easy. This would mean totally overhauling the manner in which mutual funds and other investments are paid. It means that it's no longer worthwhile to be a marketmaker since added fees are a major benefit of being a market maker.
So, while this idea has some benefit, it must be fleshed out properly.