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  • Writer's pictureBridget Sullivan Mermel CFP(R) CPA

How to Fix Capitalism

Don’t get me wrong, there’s a lot to love about Adam Smith. Each person acts in his or her own self-interest in a free market…what’s not to love?

Well, take my industry, financial advising, for example.

Most advisors know a lot about financial products than the person purchasing their services or products.

Often, the client is not in a position to evaluate the quality of what they are buying. They rely on the advisor, who might be serving their own interests, not the clients. Insurance companies in particular create life insurance products that are too complex for even other advisors to understand.

This basic conflict of interest is one of the elements at the heart of the 2008 market collapse. If mortgage brokers were required to sell people products in their best interest would the economic collapse have happened? I sincerely doubt it.

Two countries, Australia and the U.K., are now mandating that financial advisors stop charging commission. They are requiring advisors to operate in their client’s best interest. The U.S. is considering this, but we’re very far away, because a lot of big companies make a lot of money by conforming to a lower standard. A small part of the industry, which I proudly belong to, operates with a “fiduciary” standard, which means putting the client’s interest ahead of our own.

That got me thinking; what if we changed capitalism? What if we required that when someone sold us something, it be in the customer’s best interest as far as the seller knew? What if most companies offered the lifetime warranties that a few companies do now? You could return any product at any time because you were unhappy with it.

As far as I know, it’s a radical idea!

I know a lot of people are going to say, Bridget, what are you trying to do, put Twinkies out of business? I mean who could sell Twinkies under that system? Wait! They’re already out of business.

Sure, this would change our legal code. Yes, there are a lot of practicalities to work out. But isn’t it worth considering and debating ideas that might improve the world?

Attorneys, CPAs, and doctors already have this standard of care. Why not the rest of capitalism? Why not shift the responsibility to the seller? That way if they know they have a product that isn’t in the customer’s best interest, it would be their responsibility if they sell it, not the buyer’s responsibility to buy it.

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