The Department of Labor is Trying to Protect Your Hard-earned Money

BICE stands for “Best Interests Contract Exemption,” which is the new rule the U.S. Department of Labor is implementing this month with full phase by January 1, 2018.  This BICE contract would govern a financial advisor’s, or stockbroker’s ability to earn commissions and give investment advice.

Another key feature of this new rule requires an advisor to give full disclosure regarding the nature of the investment products they are selling and the amount of commission and/or fees associated.  With a contract to do the best for the client and then full disclosure of compensation, the goal is to protect the client’s money.

My take on the affect all this new regulation will have is that the smallRiskGame investor with an IRA account of under $200,000, for example, will be pushed aside and no longer have access to good advice. That’s because the new ruling pushes compensation down for financial advisors and increases their liability in working with clients, so they will not see much reason to risk themselves for the small guy, so to speak. What’s more troublesome is that this “best interests” contract allows the client to sue if they feel they did not receive advice that was in their best interest.

Attorneys love these open-ended contracts that can allow a court to be subjective.  They will make more money, advisors will lose income while tripling their liability, and many clients will not have access to quality assistance.  Is the goal of protecting the client being reached?  Not in my judgment. Only attorneys win — the agent and client are the losers.

As this plays out over the next few years,  I believe we will see another example of government overreach and creating more problems than it solves with BICE.