Phil Ashburn started working at Western Electric in 1972 and stayed there for 30 years, even after the company split up. Eventually he ended up at a phone company called Pacific Bell. “It was a great company to work for. The company took care of you and you took care of the company,” he said.
But in 2002, when he was 51, Pac Bell started offering employees buyouts. “I could either take that package, or I could retire on the company pension, which would have been about 1,500 bucks a month, or just ignore it all and continue working,” he said. While his company offered many generous benefits, “one thing they didn’t give us was an education on finances,” he said, and he didn’t know what to do when the buyout option came up. Some of Ashburn’s friends who had already retired from the company suggested he speak with Sharon Kearney, who had come around offering financial advice in the past, but she wasn’t a financial adviser – she was a broker for a financial firm. [...]
The opposition makes sense from a business standpoint, argues Robert Hiltonsmith, a senior policy analyst at Demos. “The reason they’re fighting so hard is because, to be frank, forcing advisers…to actually act in their clients’ best interest would put a pretty big dent in their profits,” he said. “I think it’s rational of these companies to basically charge as much as they can. They’re trying to maximize their profits.”
“It’s a question of being able to move toward different forms of compensation,” Valenti argued. Charging a fee for an adviser’s services means that even if he doesn’t make as much money as he would have on commission, money is still made no matter what the advice may be. On the other hand, charging an upfront fee is much more visible to a client than a commission. The DOL’s rule is not expected to ban the commission structure or make it overly burdensome, as a proposed rule that was shot down in 2010 would have.