The Labor Department issued new regulations on Wednesday that will require financial advisers and brokers handling individual retirement and 401(k) accounts to act in the best interests of their clients. The government move is expected to encourage a shift of retirement funds into lower-cost investments — potentially saving billions of dollars for many ordinary investors. The New York Times.
Today, the Health and Human Services Office of Exercise, Sport and Fitness issued new regulations governing the regulation of fitness trainers that operate in our nation’s health clubs. We are confident that these new rules will result in more people getting in top physical shape at a lower cost to them. This will potentially allow thousands more Americans to get qualified fitness advice.
The most important change is that the new regulations will effectively sever any ties between a personal trainer and a gym or fitness center. Most personal trainers are currently employed by a gym or fitness center, and the clients pay the gym for their sessions. We find this problematic on many levels.
Most critically, it creates a direct conflict of interest between the trainer and the client. In short, the best gym for the customer might not be the gym he or she has joined, but the trainer–who has the best perspective to discern this–has no incentive to inform them if they have made a mistake. In fact, the personal trainer would be financially penalized if they were to tell them this, since if the client followed their advice they would lose a customer.
Our new regulations would prohibit fitness facilities from hiring trainers of any sort. Instead. personal trainers would be required to negotiate agreements with the various gyms in their city or neighborhood that would allow them to bring clients to the gym in exchange for some sort of fixed payment. Gyms and fitness centers would thereafter be required to offer daily and weekly memberships for customers, which would be a prorated fraction of the current monthly membership costs. Rather than being forced to buy what is essentially a bundled good, consumers would have more freedom to buy only what they value from a gym.
Calculating a daily gym membership may be difficult because many gyms do not have a fixed membership price; they price discriminate, or offer frequent sales, so different customers pay different prices. This regulation would prohibit that, as well as all sales or discounts, and require each customer to pay the same price for gym membership, whether it be on a daily, weekly, or monthly basis. Also, we suspect that the price discrimination may sometimes result in women, minorities or members of the LGBT community paying more for gym membership than others, although the data is not definitive on this, and a blanket price will address this potential inequity.
The other problem is that the cost of a personal trainer is very high–often as much as $150 an hour in urban areas–and most people cannot afford this. We believe the government should work to reduce that cost; one way is to nudge people to eschew a personal trainer and use a smartphone app instead, which can be just as effective in achieving training goals as a trainer, studies have shown.
To encourage fitness centers to make this option more freely available we will mandate that a smartphone holder be attached to every piece of equipment in every fitness center in America by the end of 2017. Also, each customer who requests to hire a personal trainer must be informed that a smartphone app can do everything a personal trainer can, and that it is much less expensive. If they continue to insist on a personal trainer they must be given a list of all certified personal trainers in the city. The gym may not make a recommendation for the client, to avoid conflicts of interest.
HHS will maintain that list as well as the certification of all personal trainers. After July 1 2017, all personal trainers must have a federal certification to work as a trainer: that will consist of a college degree from a non profit college in a field related to sports or exercise science, a 30 hour training program that HHS will design, and the successful completion of an exam administered by HHS.
HHS will also certify which exercise apps can be safely used in a gym. Only apps that we confirm give the user a solid and safe workout can be used in a gym or fitness center. The agency has also awarded a $2 million contract to the University of North Carolina Greensboro to make a workout app to be made available for free. For those who cannot afford a smartphone the government will also distribute CD-ROMS of the program as well, and publish it in booklet form.
HHS is also working with the FCC, which recently made its $2 billion of annual funds for subsidized telephone and cellphone service available to be used for internet access as well. We propose to double the $2 billion to subsidize the purchase of smartphones by low-income households as well, which will enable more families to get customized workouts.
The last problem to address is the unfortunate side-effect of our efforts to make better fitness advice available at a lower price to all Americans: Namely, these regulations will essentially make most personal trainers self-employed workers. In order to combat the potentially damaging impacts of throwing tens of thousands of workers into a highly variable, unpredictable wage environment, we propose to create a new entity in each major city that will employ all certified trainers and pay them a fixed salary, funded in part by an assessment on each fitness center, which will be based on the number of visits made by each personal trainer visit.
Each trainer will make the same monthly salary. They will also be entitled to 6 months paid family medical leave.
The combination of new rules will result in more people getting better fitness instructions at a gym more appropriate for their interests and skills and at a more reasonable price. and personal trainers will have a more stable and secure income.
Ike Brannon is president of Capital Policy Analytics, a consulting firm in Washington D.C.
