The NYT has a great piece on a whistle-blower at JP Morgan, who tried to blow the whistle on financial advisers that were putting their own interests ahead of their clients. Yet somehow, the piece fails to mention the Obama administration’s proposed conflict of interest rule, designed to address precisely this problem. That omission is particularly egregious in that the COI rule was last seen in the crosshairs of the current budget debate (the R’s had a “rider” on the budget bill to block the rule’s implementation).
According to the piece, this guy, John Burris, “avoided [recommending] what he considered unsuitable, expensive and underperforming investment products, including some offered by JPMorgan, which drew criticism from his bosses.” He also complained repeatedly about co-workers who, incentivized by the bank to sell their own products, failed to put their client’s interest above their own.
Burris got canned, and the article tells a fascinating/ugly story about how evidence against him may have been cooked up by the bank. He claims the charges “were trumped up by his superiors as an excuse to get rid of him, and he was actually fired for refusing to push JPMorgan investment products and then calling attention to the issue,” and the piece finds some circumstantial evidence to that effect.
People, this is why we need the conflict of interest rule! Burris worked in Sun City, AZ, home to many retirees, so it’s likely that he and his less ethical colleagues were dealing with retirement accounts. As Lily Batchelder and I describe here, by putting in place a “fiduciary,” or “best interest” standard, we would be providing support for the advisers who want to do what’s best for their customers but are pressured by their company to act in ways that conflict with the customer’s best interest, and, ultimately, their retirement security.
As Barbara Roper from the Consumer Federation of America points out, “the rule requires companies to eliminate or limit policies (both pay incentives and other non-pay policies like sales quotas, bonuses, personnel decisions) that encourage advisers to base decisions on factors other than the customer’s best interests.”
By doing so, it supports efforts to reform a system wherein good actors like Burris face retribution simply for doing what’s right for their customers. If the incentives were aligned the way they should be, with the client’s best interest front and center, this guy might not have had to blow a whistle in the first place. But if he or others do have to do so, they should have the law on their side, which is why this new rule is so important.
It’s also important for journalists writing about such issues to inform their readers that there’s a policy in the offing designed to help. I’m not saying they should endorse the rule, but readers need to know what’s at stake here and the extent to which the financial services lobby and the politicians they support are trying to kill the new rule.