Will DOL’s ‘Fiduciary Rule’ Silence Dave Ramsey?

It is indeed sad that 40 percent of millennials favor the government banning speech that some deem offensive, according to a recent Pew poll. Even more distressing is that college students have plenty of company with members of other age groups and professions who want to shut down speech they disagree with.

Take speech about personal finance. This is an area where there would certainly seem to be room for a diversity of opinion, given the complexity of the topic and differences in individual financial goals and circumstances. That’s why there is no shortage of books and radio and television shows with differing viewpoints about financial planning. If you don’t subscribe to what Suze Orman or others have to say, you can always read or tune in Dave Ramsey and even call into his radio show for advice.

At least, that is, for now. A growing group of regulators and financial professionals are declaring that financial advice, even if it occurs in a public forum, should be suppressed if they deem the advice “incorrect.” And they see a pending rule from the Department of Labor (DOL) as the perfect vehicle to make Ramsey and others who offer financial tips to the public zip their lips or face government sanctions.

A recent article in LifeHealthPro, a prominent online trade journal for insurance agents and financial advisers, calls for Ramsey to “be regulated and to be held accountable” by the government for the opinions he gives to listeners. And it opines that the DOL’s proposed “fiduciary rule,” likely to be finalized in the next few weeks unless defunded by Congress in spending bills in December, would be the ideal tool with which to muzzle Ramsey and other personal finance broadcasters.

“This rule would define Dave as an advisor and thus … he would be regulated as a fiduciary,” Michael Markey, insurance agent and owner of Legacy Financial Network, argues in the LifeHealth Pro article he authored. After going through a litany of financial tips given by Ramsey to callers on which Markey holds differing views—such as what type of life insurance to purchase (and I take no position on who is right, as these are not public policy issues)—Markey hails the DOL rule as ushering a new era in which “entertainers like Dave Ramsey can no longer evade the pursuit of regulatory oversight.”

Is it the case that the rule would do this? Or is Markey’s interpretation just wishful thinking on the part of someone who—like many of the demonstrators on university campuses—wants to shut down opinions he disagrees with?

Markey is right that the DOL rule does expand massively—and in my belief, probably illegally—the definition of the term “fiduciary” under the Employee Retirement Income Security Act of 1974. As I have written in National Review:

In the 40 years since ERISA was first enacted, DOL regulations have for the most part strictly applied the term “fiduciary” to managers of defined-benefit plans and those who provided individualized investment advice on a regular basis, such as registered investment advisers. Under the new rule, financial professionals who provide even one-time guidance or appraisal of investments could find themselves classified as “fiduciaries.”

 Moreover, as I have noted in that article and in many blogs, the term would apply to many financial professionals who do not even give advice, such as custodians of self-directed IRAs. Since those deemed “fiduciaries” would have to follow the mandate to only handle investments that adhere to what the government deems as savers’ “best interests,” individual choice of holdings in IRAs and 401(k)s would be sharply restricted.

But until I read Markey’s article in LifeHealthPro, I never thought the rule would cover those who offer free advice in a public forum. So I asked Kent Mason, partner at the law firm Davis & Harman who has testified before Congress on the ill effects of the fiduciary rule, for his view. Though Mason strongly disagrees with Markey that Ramsey and others should be shut up, he told me Markey was mostly right in his interpretation of the ability of the fiduciary rule to muzzle financial personalities answering portfolio questions from callers or audience members.

“Under the proposed regulation, 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,” Mason said in an email. 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.” Mason agreed with Markey that the compensation Ramsey receives from radio stations that carry his show and from book sales are enough to define Ramsey as a “fiduciary” under the rule.

Though the rule does contain an exemption for “recommendations made to the general public,” this wouldn’t protect Ramsey and other radio and television personalities if they gave specific answers to callers or audience members, both Mason and Markey argue. Similarly, Mason adds, while the main part of investment seminars would be exempt, “if during the seminar, someone from the audience asks a question about his or her situation and the speaker answers the question with respect to specific investments, that answer would be fiduciary advice.”

And given how the rule would work for others deemed “fiduciaries,” this means that anyone conducting a personal finance event—be it a radio or television show or seminar—would be subject to fines and/or lawsuits if he or she answered questions from audience members that the government deemed to be not in their “best interests.”

Hopefully, were a financial broadcaster ever sanctioned under this rule, the courts would strike down such punishment as a clear violation of the First Amendment guarantee of free speech. But Congress should not let it come to that, as it has a clear Constitutional obligation to defund the fiduciary rule before it is ever implemented.

Even without this flagrant First Amendment breach, there are more than enough concerns about this rule for Congress to defund it in upcoming legislation for fiscal year 2016 spending. A recent letter coordinated by the Competitive Enterprise Institute and signed by 33 conservative and free-market groups warns about many Americans losing their current brokers and a projected $80 billion cost to consumers from loss of access to financial advice. Ninety-six House Democrats also wrote DOL expressing concern that the fiduciary rule could limit access to retirement planning for poor and middle-class Americans.

So why not create a “safe space” for free speech and financial freedom?

This article first appeared on the Competitive Enterprise Institute’s Open Mark blog. CEI Research Associate Rahul Gangan contributed to this post.