Guys, somehow I could not post this on the money management...

Guys, somehow I could not post this on the money management website but I want to share my thoughts on the recent "opt-in" reform.

"I think the most valuable part of financial advices is the discipline financial advisers impose on their clients when things go to the extremes of pendulums. Seasoned advisers understand the market cycle and therefore will help his or her clients to make investment decisions when things look the rosiest or the most awful. In other words, the continuity of financial advices is a great weapon the facilite long term, favorable investment returns.

When taking that in mind, one can imagine how much it will cost a client when he or she needs the advices most but fails to obtain them. Market tends to move from one extreme to another. It matters tremendously to the long-term investment results when a client chose to invest more at rock-bottom price or simply sell in a panic. How many times can a client make those terrible mistakes in his or her lifetime without jeopardizing the retirement? Once would be fatal in the late stage of life.

The outmost role of financial advisers is never to promote the best products or the highest returns. In my mind, financial advisers need to play a role of gatekeeper and prevent disasters from happening. That being said, I want to argue here, is it really worth it to change the "opt in" rules because we want consumers to have a better choice and save money? Look at 401k and IRA or private health insurance in the United States, they are total disasters because this is still an age in which most people are not financially literate.

As an outsider of the industry, one result I can foresee from the FOFA and "opt in" reform is that poorer people will be marginalized out of good advices. It is hard to imagine people with 50K in assets will chose to pay 200-300/hour for a meeting. The threshold will be higher. But without good advice and discipline, how many people can actually reach the threshold where it will be worth it for them to actively pursue financial advices? This will be a catch-22 going forward.

Another thing I am pretty sure is that there will be fewer independent financial advisers down the road and this will bear consequences in the future. It will be great news for asset management companies and dealer groups but bad for the consumers.

It is better to enforce the current regulation better and punish bad guys harder instead of regulate more for the sake of more regulation.