Film Recommendation: Linda’s Fiduciary Cake

Regulatory standards regarding information and advice provided by financial professionals are incredibly important. These issues are also incredibly complicated and boring. ”

Fiduciary vs. Suitability standard….” The phrase induces narcolepsy just hearing it, unless you happen to be really into this issue or you have a financial stake in the accompanying government regulations. That’s a real challenge in addressing key personal and policy concerns.

I financed this short video, which debuted at Huffington Post, to help address this challenge. (See the site I created at fiduciarystandard.info for more information. I’ve drawn from there in this post.)

I’m responsible for the script and everything in it. I’m grateful to Frey Hoffman, who co-wrote the script with me, and skillfully directed, filmed, and edited the video. Frey has helped me before in making other videos you may have seen. His expertise at Freydesign productions makes these possible.

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The film is roughly based on Chapter 6 of  my book, with Helaine Olen, The Index Card: Why Personal Finance Doesn’t Have to be Complicated,  about which RBC reader are all too familiar.

Helaine and I would obviously be gratified if you bought the book. But you don’t need to buy our book to grasp the basic personal and policy issues presented in that this video. The fine print that scrolled across the screen is from actual Fidelity paperwork, and can be found here. This 2012 New York Times article by Tara Siegel Bernard provides additional information.

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I should make something clear, too. I’m convinced that many people can benefit from sound advice from a financial professional: What are the different retirement savings options available to me? How can I sensibly save for my child’s college? Are we ready to buy that dream home when the mortgage payments may stress our monthly cash flow? Personal finance is scary and complicated. It never hurts to have another pair of eyes to examine what we are doing.

Yet the very anxieties and consumer ignorance that lead us to seek financial advice make us vulnerable when advisors face financial incentives to steer us towards overpriced or unwise investment products.

It’s not that financial professionals are defrauding people or are criminals on the Bernard Madoff model. They are simply steering people into investments that are notably more costly than they need to be.

Audit studies in which actors pose as young couples seeking financial advice indicate that biased advice is ubiquitous within the industry. The study published here is quite depressing.

[Cross-posted at The Reality-Based Community]

Harold Pollack

Harold Pollack is the Helen Ross Professor at the School of Social Service Administration at the University of Chicago.