Feds Want All FAs To Be Fiduciaries Hot
• requiring that broker-dealers who provide investment advice about securities to investors have the same fiduciary obligations as registered investment advisers
• providing simple and clear disclosure to investors regarding the scope of the terms of their relationships with investment professionals
• prohibiting certain conflict of interests and sales practices that are contrary to the interests of investors.
The effort to regulate advisors at RIAs like registered reps seems unstoppable. Like it or not, it’s what the Administration wants, and consumer groups, like Consumer Federation of America, also are backing this effort.
We don’t know how this would be done, of course. But it’s likely FINRA will be charged with the task. RIAs should expect, perhaps as early as 2010, much higher costs for compliance.
Imposition of the fiduciary standard on registered reps—if this catches on—will rob RIAs of a huge marketing advantage. Accepting the responsibility to always do what is in a client’s best interests is a real differentiator for RIAs. It’s hard to imagine how the fiduciary standard would be applied to brokers who accept commissions as well as fees. Any comments from readers clarifying that part of the proposal would be appreciated.
It seems likely that making all advisors say they will act as a fiduciary will water down the meaning of the term. While the Financial Planning Coalition—the group comprised of Financial Planning Association, National Association of Personal Financial Advisors, and the CFP Board of Standards—today issued a release applauding the Administration for proposing the imposition of the fiduciary standard on brokers, I am not as sanguine. I suspect that advisors who today are fiduciaries are going to have a tough time differentiating the way they give retail advice from the way brokers who are fiduciaries do it.