Quote of the Day:

The Obama Administration may have only 17 months to go, but that’s still enough time to do plenty of economic damage. Witness Labor Secretary Tom Perez, who is rushing through a new regulation for financial advisers that isn’t needed, that he lacks clear legal authority to impose, and that will hurt the very people it is supposed to help. Other than that, it’s a splendid idea.

–an editorial in today's Wall Street Journal

We've already blogged on the sweeping reforms of the financial industry Secretary Perez is trying to establish in the waning days of the Obama administration. The regulations would have a profound effect on how IRAs and other retirement accounts are managed. At first glance, the regulations might seem to be designed merely to transform the commission system on which financial advisers rely.   

However, in reality these regulations would make it extremely difficult to get certain investments into your retirement portfolio, regardless of your preferences. A financial adviser who advises products that are frowned upon by the administration might find herself in hot water. The new regulations furthermore would make it risky for brokers at low-cost firms to so much as answer some questions informally. Under the new regulation, a financial adviser might not be willing to tell you what an indexed fund is because providing such information would possibly give her a legal liability.

The regulations are being presented as a way to help small investors. Instead they would make it harder for such investors and give the government input into their investment portfolios. The Wall Street Journal explains:

[The regulations will function] by effectively killing the commission model for middle-income investors. Customers will need to sign a complicated contract before they receive any advice, which some say will make giving financial advice over the phone unworkable.

The financial-services firm Primerica says the rule “will be particularly devastating for those with less than $25,000 to invest, which is the lowest required minimum investment for a fee-based advisor we could find.” These small investors will face either higher fees they cannot afford or letters from their financial houses saying they will have to get their financial advice on their own. About 45% of Americans have accounts with less than $25,000, according to the Employee Benefit Research Institute.

Mr. Perez has suggested in hearings that customers can receive robo-advice instead. Seriously. We’re not sure we trust Siri of iPhone fame as a stock picker. We’d prefer the flesh-and-blood adviser who may have been recommended by a friend.

Labor held hearings last week on the regulations, but the Journal says that many critics of the proposals see the hearings as pro forma, just something to cite when the inevitable legal challenges arise.

I don't know about you, but I'd like the option to pay a broker instead of relying on robot calls.