A battle over exactly how investors should be treated when they get financial advice has been underway for years. The Obama administration pushed for stricter investor protections, while the Trump administration has been putting looser rules into effect. But here’s the thing: The tougher Obama rules, which were never fully put into effect, have already done some good. That’s the import of an innovative new study published by the Harvard Business School and the National Bureau of Economic Research.

It has a technical title — “Conflicting Interests and the Effect of Fiduciary Duty — Evidence from Variable Annuities,” but contains nuggets that are worthy of wider attention. Its authors are Mark Egan, a Harvard Business School professor; Shan Ge, a professor at New York University’s Leonard N. Stern School of Business; and Johnny Tang, an economics graduate student at Harvard. The study says that the threat of stricter regulations alone has improved at least some of the behavior of brokers and financial service firms….The study found something startling: The financial services industry began to respond to the fiduciary rule’s requirements — even though the rule has never gone into effect. The study dealt specifically with a limited part of the financial marketplace but it has broader implications. The researchers focused on the sale of variable annuities, which are notorious for frequently carrying high fees and onerous restrictions that generate hefty profits for insurers and brokers while eating away at the long-term returns of retirement investors.

Even the Threat of a Tougher Rule on Financial Advice Has Helped Investors – The New York Times