Advisors sound the alarm on fiduciary standard

Advisors sound the alarm on fiduciary standard

Advisors sound the alarm on fiduciary standard The ongoing power play to develop a ‘best interests’ rule both in the U.S. and Canada suggests not all clients will win should a fiduciary standard carry the day.

The U.S. Department of Labor is currently working out the details how to put such a fiduciary measure into place. It’s only a matter of time before its implementation; that’s got some advisors concerned many clients are going to be left stranded unable to obtain investment advice.

“We believe the Department’s proposal, if enacted, would result in fewer Americans having access to the help and guidance they need to save for retirement,” wrote SIFMA president and chief executive Kenneth E. Bentsen Jr. in his letter to the U.S. Department of Labor. “The Department’s new, and more complicated, proposal risks reducing many investors’ access to meaningful guidance and education while unnecessarily increasing their costs.”
 
In almost every way Canada follows the U.S. when it comes to innovation, financial services being no exception. If a fiduciary standard is going to hurt some clients in the U.S., it’s possible to have the same effect where many could go without advice or pay dearly for the privilege.

“The Department, in its own analysis of the 2011 final rule implementing the investment advice provision of the Pension Protection Act, found that financial losses from investing mistakes due to lack of advice likely amounted to more than $114 billion in 2010,” wrote SIFMAs president. “This is particularly troublesome for low to middle-income savers who rely heavily on the brokerage model. Currently, 98 percent of IRA investors with less than $25,000 are in brokerage relationships.”

The Canadian concerns aren’t much different.

“A more rigid standard than what already exists would not necessarily benefit the investor,” Kitchener, Ont., advisor Michael Gentile told WP when asked about a Canadian fiduciary standard. “However minimum standards, i.e. certifications such as CLU, CHFC, and CFP would significantly enhance the quality of advice available to the consumer.”

Greg Pollock, president of Advocis, has also addressed calls for a fiduciary duty in this country. He hasn’t a problem with a best-interests standard but rather that a DOL-type definition and its proposed implementation would be cumbersome for clients and advisors alike.

“Advocis members who practice in both the insurance and securities sectors are already subject to a common law fiduciary duty,” wrote Pollock in Investment Executive in June. “Advocis recognizes that gaps in the current regulatory framework still leave consumers exposed.” Advocis’ Raising the Professional Bar addresses the need for enhanced advisor professionlism in order to better protect consumers.
3 Comments
  • Ken MacCoy, CHS 2015-07-23 10:17:02 AM
    Regulators & politicians need to get their heads out of ... the sand and consider the Advocis proposal, if they really want to protect low to middle-income Canadians.
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  • Janet 2015-07-23 12:02:40 PM
    Gee, I wish there was an explanation for the concerns of having a fiduciary standard in this article. It does not explain how consumers would be negatively affected.
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  • Ken K 2015-07-23 5:11:12 PM
    Investors should be alarmed that the advice they are getting is not required by regulation to be in their best interests.i certainly agree that proficiency needs to be dramatically raised and embedded sakes commissions eliminated.Reps are using all kinds of titles to project competence but it is a rouse.It's time for advice to be given out by professionals with a fiduciary duty and distribution to be dispensed by salespersons.That way , Canadians have a better chance of retiring in confidence.Pros should embrace the fiduciary standard not fear it.
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