On July 21, 2010, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into Federal Law. The law, commonly known as the Dodd-Frank Act, was created in the wake of the 2007-2008 financial crisis to prevent such an event from ever happening again.
Dodd-Frank created sweeping reforms, affecting everyone from big banks to financial advisors. It set limits in place and created parameters to prevent an institution that’s “too big to fail” from failing. It also protects consumers through the establishment of Consumer Financial Protection Bureau, an agency that oversaw mortgage, student loan, and credit card companies to insure they worked in the interest of consumers.
Many politicians, bankers, and investment firms disagreed with the establishment of Dodd-Frank. While their reasons were many, the general consensus was that it increased regulation and severely limited how investors and banks were able to conduct business.
Now, President Donald Trump is slowly removing parts of Dodd-Frank through executive orders. While investors and banks might be happy to hear this news, it might not be the greatest thing for you, the consumer and budding investor. That’s why The Wall Street Journal put together this video on just how Dodd-Frank’s repeal could impact you…and potentially chance the American economy as we know it.
What does the repeal of Dodd-Frank really mean for you? For one, it means your financial advisor doesn’t necessarily have to have your best interests at heart when they try to sell you on financial products. They could, in fact, offer products that would benefit their commissions but not really help your finances.
The repeal also means that protections put in place to prevent another financial crisis would be severely crippled. Since Dodd-Frank’s main goal was to prevent a future financial crisis from happening, removing key parts could get rid of any safeguards in to avoid systemic collapse.
Despite the law’s repeal, you shouldn’t avoid investing. The market is still fairly healthy, and putting money into things like ETFs and retirement accounts are always lower risk than putting all your money in a single stock. Even if your financial advisor tells you to invest in something, be sure to always do your research before handing over your money. After all, no one should ever make the final decision on an investment but you.