Fiduciary standard no defense against Madoffs of the world

Fiduciary standard no defense against Madoffs of the world

Fiduciary standard no defense against Madoffs of the world Don Trone recently appeared before the Department of Labor’s hearing to develop a fiduciary standard of care for financial advisors in the U.S. Trone, a big advocate of the fiduciary standard and often referred to as the ‘Father of Fiduciary’, doesn’t think the DOL’s rules are going to amount to a hill of beans for fraudsters like Bernie Madoff.
 
“I think research will show that over the last 15 to 20 years, fiduciaries have stolen more money from investors and retirement savers than brokers,” Trone told DOL executives in August. “Bernie Madoff was subject to a fiduciary standard, and, if he was here today, I think he would say that the department’s proposed rules would not have slowed him down.”
 
Trone still believes all advisors should become fiduciaries but before they do they need to get at least five years of industry experience and be trained in the fiduciary best practices. An advisor going from product salesperson to fiduciary simply doesn’t happen overnight.
 
What should happen in Canada depends on who you talk to.
 
“As a discretionary portfolio manager we operate under a fiduciary standard,” said Alan Fustey, a portfolio manager with Index Wealth Management. “We’ve been under that regime forever. Can you operate under a fiduciary standard where all you’re really doing is putting your client’s interests ahead of yours and still maintain a profit? Absolutely.”
 
It’s possible that Canada can move from a suitability standard to a best interests’ standard without going as far as implementing a legally defined fiduciary standard of care allowing many advisors to remain advisors without having to obtain the fiduciary accreditation a portfolio manager must have to offer discretionary management.
 
“Really if you are going to get rid of the current suitability standard and Canadian fiduciary accreditations are implausible, investor advocates should be pursuing a “best interest” standard,” a senior advisor in Kitchener wrote in an email to WP. “But these are big changes and in my opinion, fiduciary accreditations will do nothing to protect investors. Fiduciary principles incorporated in a “best interest” standard? -  Then I am open to a discussion and dialogue.”