One of Wall Street’s top lawyers is taking aim at one of Washington’s biggest regulators.
In his new book, “Going Public: My Adventures Inside the SEC and How to Prevent the Next Devastating Crisis,” veteran lawyer Norm Champ recounts his tumultuous five years at the Securities and Exchange Commission.
Champ, now a partner at Kirland & Ellis, laments a “culture of fear and paranoia” spurred by anonymous complaints and backbiting. He ultimately stopped regulators from sharing information about investigations.
In the wake of the financial crisis, a slew of so-called robo-advisors promised consumers a fully automated version of money management that purports to remove human error—and avarice—from the equation. Instead of a human broker making decisions about how to invest your money, companies like Betterment and Wealthfront let algorithms do it. Experts have speculated the fiduciary rule would benefit robo-advisors by making the compliance costs too great for money managers to justify holding onto smaller clients. Robo-advisors that can perform much the same function at a lower cost would likely gobble that business right up.
In a 2015 Congressional hearing, then-Labor Secretary Tom Perez repeatedly cited Wealthfront as the way of the future. “They have a platform that enables them to lower their fees, operate as a fiduciary and do well by doing good,” Perez saidat the time.
“Today’s announcement of a rollback or freeze on some of those rules probably will shrink the market for robo-investing,” says former California state senator Sam Blakeslee, president of the broker-dealer Blakeslee & Blakeslee.
“This is a sad day for individual investors. Repeal of the fiduciary rule would imperil the retirement savings of millions of Americans,” Jon Stein, founder and CEO of Betterment, said in a statement. “Repeal means favoring the bottom lines of the financial services industry over the American people, who deserve financial transparency and honesty.”
The robots are rolling forward with a full-frontal assault to capture Wall Street’s vast investment fees and commissions.
More investors are warming to the cold, steely embrace of the increasingly sophisticated, low-cost automated robo-advisers. The primary reason is to save money on those fees and charges.
Bots are squeezing their flesh-and-blood competition and threatening the jobs of thousands of human brokers in the $20 trillion US wealth management business.
Nearly one in three investors says these machines are superior at picking stocks and lessen their risk, and almost as many say the machines are better at selecting investments for retirement than human brokers, according to a new study of US investors by market research and consulting firmSpectrem Group.
Tell it like it is, Bernie!