Famous showdown between "Fast Eddie" Felson and “Minnesota Fats” in the iconic American film, The Hustler
Showdown between “Fast Eddie” Felson and “Minnesota Fats” in the iconic American film, The Hustler

If you think we’re letting go of the “fumbling children” reference made by FSI chairman Adam Antoniades, you have another thing coming. He reminds me of the proud “Minnesota Fats” character in the classic film The Hustler— he doesn’t want to recognize the truth and talent of the situation he’s faced with by “Fast Eddie” Felson (Paul Newman), because it means that his reign as best player has ended.

Mr Antoniades goes so far to call the leaked White House Memo from January 13 simplistic, though it refers to more PhD studies than his fumbling response could even spell, so he’ll have to try and respond again.

The decidedly complex datasets referenced from such luminaries as Dr. Christoffersen et al (hundreds of academic citations through Google scholar as of yesterday), Dr. Chalmers, Dr. Del Guernico, Dr. Reuter, Dr. Gerstresser, Dr. Gennaioli, Dr. Morey, Dr. Hackerthal, Dr. Jappelli, and more are better than the “old people better look out” response because these people have been researching for years and have more academic standing than he can pretend to. There are case studies of other countries. There are case studies of firms engaged in forward-thinking practices. There are datasets (thanks to afore-mentioned Dr. Christoffersen — one of whose citations include an impressive Duke PhD thesis based upon his work — and several researchers who chose to follow his research out of their own volition).

The argument that the data is too complicated to change doesn’t apply here. There is complicated data on both sides of this argument. Smart people argue on both sides, granted, but the “its too hard” argument is not a sufficient response for anyone to carry off anymore because it makes you sound lazy and entrenched, not smart.

Please, sir, prove your vast intellect with a well-researched paper of any kind that isn’t just a pat on the head and a “you wouldn’t understand.” Stop talking down to your audience. Consumers want legitimate legal protection, and the White House wants to help them avoid the estimated $6 – 8 billion (35 – 50 bps) loss experienced by the average consumer per year from these financial advisors who use high-quality data, but have conflicts of interest. That means, this is a minimum estimated loss to consumers.

Beyond the academics and case studies provided in the memo dismissed as “simplistic,” Mr. Antoniades goes on to discuss the danger to the elderly should the 1975 loose ruling be constrained to oblige investment advisers to eliminate hidden fees.

Memo says:

  1. Consumer protections for investment advice in the retail and small plan markets are inadequate
  2. Current regulatory environment creates perverse incentives that ultimately cost savers billions of dollars a year

To be more exact:

“An investor receiving conflicted advice who expects to retire in 30 years loses at least 5 to 10 percent of his or her potential retirement savings due to conflicts, or approximately 1 to 3 years’ worth of withdrawals during retirement.” (page 2 of the Memo)

We met a nice group of plan administrators earlier last year who were baffled by revenue-sharing built into their record keeping service agreement before we began to work with them – they had lost hundreds of millions of dollars on a plan where the low returns looked like an effect of poor investing. They were public servants, thus a government plan was duped by a private company, folks! Say what you will, but the law will change if this continues to happen. The government does not like to lose.

And if the government isn’t able to win, chances are, small businesses aren’t able to figure out a way around it either. In fact, they aren’t. Even with the best quality data, when investment advisors have conflicts of interest, retirees lose years of retirement savings according to one of the most extensive studies on the matter (Dr. Christoffersen et. al. 2013).

That’s what the White House is talking about changing – and what the entrenched benefactors of the old system, aka “Minnesota Fats”, want to avoid. The old system wants to hold off the new talent in the financial arena so they can have just one more eleventh hour.

Don’t we want to a better system to retire on?

Demand a higher fiduciary standard and go to SaveOurRetirement.com to sign the petition.


Michele L. Suriano, Accredited Investment Fiduciary™, is president of Castle Rock Investment Company, a woman-owned SEC registered investment advisory firm serving qualified retirement plans. www.CastleRockInvesting.com