This Could Ensnare Financial Broadcasters


Dollar SignCould a new federal fiduciary rule censor on-air financial experts?

One expert at Forbes believes so.

The controversial pending Labor Department rule would impose new restrictions on financial professionals who handle IRAs and 401(k) accounts.

Financial broadcaster Dave Ramsey has come out against the change, saying it could hinder the ability of the Middle Class to access financial advice, while benefitting fee-based investment advisors.

Forbes columnist John Berlau says financial experts have told him the change could affect not just Ramsey, but also TV hosts like Suze Orman and Jim Cramer and other broadcasters who discuss business and investment issue on-air. They would be ensnared by the rule’s broad redefinition of a vast swath of financial professionals as “fiduciaries” and its mandate that these “fiduciaries” only serve the “best interest” of IRA and 401(k) holders.

The proposed regulation acknowledges “concerns that the general circulation of newsletters, television talk show commentary, or remarks in speeches or presentations at financial industry educational conferences would result in the person being treated as a fiduciary.”

The main focus of the Labor Department rule has been its likely effects on brokers and their customers. The rule creates a presumption against brokers taking third-party commissions from mutual funds they sell to savers. Because of this, savers who currently pay only a small commission when an order is executed may have to pay a much larger fee based on a percentage of their assets, which would drive some brokers to simply stop serving middle-income investors.

Experts tell Berlau investment advice from a radio host to a caller regarding the caller’s own investment issues would appear to be fiduciary advice if the advice addresses specific investments. It doesn’t matter that Ramsey and other hosts aren’t compensated by listeners, he adds, as the DOL rule explicitly covers those who give investment advice and receive compensation “from any source.”

The proposed rule does lay out specific conditions media must meet in order not to be regulated as “fiduciaries.”

Because of the potential chilling effect on financial hosts, he recommends the Labor Department withdraw the rule.