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With a divided U.S. Congress and a pro-Wall Street agenda at the U.S. Securities and Exchange Commission (SEC) and U.S. Department of Labor, little hope exists in 2020 for meaningful regulatory enhancements that would benefit consumers. Still, foundations for reform can be laid in the halls of Congress. And a few of the states will continue their efforts to step into the void, especially in applying fiduciary duties to brokers.

Here’s my “wish list” for reforms in 2020, acknowledging that some of these actions may take years, or even decades, to accomplish.

Product provider-paid fees disappear

No sales loads. No contingent-deferred sales charges. No 12b-1 fees. No payment for shelf space. No insurance company or mutual fund sponsorship of educational seminars, for either financial advisors or their clients.

Why such a draconian step? It’s simple. The elimination of product-provided compensation is the best, and perhaps the only way, to successfully meet the fiduciary standard of conduct. In particular, it meets the “no conflict” and “no profit” rules embodied within the fiduciary duty of loyalty. These are tough rules that require informed consent of the client even after full disclosure (remembering that no client can consent to be harmed), followed by the test that the transaction is substantively fair to the client. Compensation to a financial advisor, by anyone other than the client, creates conflicts of interest that cannot be mitigated simply by mere disclosure.

This does not mean that commissions would disappear. In essence, a financial advisor could still charge 5.75% (or more, or less, subject to the fiduciary requirement that compensation be reasonable), but the “commission” must be fully transparent and deducted directly by the advisor from the client’s funds. This enables advisors to “levelize” their compensation for smaller accounts. It is similar to charging a fixed fee (which varies by the amount of assets invested) for advice on a particular transaction.

Soft dollars – payments by asset managers to brokerage firms for “research” (that is rarely used and vastly overpriced) – also fall by the wayside. This requires action by the U.S. Congress.