The House and Senate continue to wrangle over the fiduciary issue as they reconcile their respective versions of the financial regulatory reform bill.
In case you have not been following this story, here’s the problem. Currently, investment advisors must provide advice and service that is in the client’s best interest. In addition, investment advisors must disclose conflicts of interest. Broker-dealers and insurance agents are required to offer products and services that are “suitable” for the client.
As you might imagine, the brokerage industry, the banking industry and the insurance industry all opposed to a fiduciary standard. They believe a study of the matter is necessary. They also claim a fiduciary standard would change their “business model.” … Yes, and this would clearly be in the best interest of their clients.
Under consideration is a watered down proposal that would empower the SEC to conduct a study of the standards of care currently in place in the financial marketplace and then establish a single fiduciary standard, if this would eliminate gaps in oversight of various types of financial advisors.
I am not optimistic about this. The forces acting against the fiduciary standard are incredibly powerful. The stakes are high for them. I predict Congress will fail to implement the fiduciary standard. … We should know the outcome soon, as the negotiators would like to complete the bill tomorrow.
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