The big compromise on fiduciary standard

The big compromise on fiduciary standard

The big compromise on fiduciary standard Vanguard founder Jack Bogle appeared at the Institute for the Fiduciary Standard’s media briefing this week; he wasn’t shy about the need for the Department of Labor and/or the SEC to implement the fiduciary standard rule for advisors. However, in order to get it pushed through, he’s tempered his tune.
“I’m pretty sure that what will come out of all of this is a fiduciary standard for registered investment advisors and broker/dealers,” Bogle said during the Institute for the Fiduciary Standard's media briefing. “I think what we want to do here is establish the principle; let’s get it down somehow. If we have to concede certain points along the way to get there, I for one, would concede them, depending on the points.”
But Bogle’s only willing to concede on the administrative requirements of such a rule and not on the principles behind enacting a fiduciary standard. In the end he believes a fiduciary standard will be adopted but only with the fund providers brought on board kicking and screaming.
Why? They’re making too much money within the current system.
“T. Rowe has been an enormously profitable stock, unbelievable—far better than their funds could ever do,” Bogle said at the media briefing. “And their managers have prospered, not necessarily by owning the funds they manage, but by owning the management company."
Here in Canada there’s no doubt what the Small Investor Protection Association thinks about a fiduciary standard but they’ve taken a slightly different view than Bogle.
“Most professionals have a fiduciary duty – it doesn’t matter if it’s a doctor or lawyer or whatever. They have to look after their client’s best interests,” SIPA President Stan Beull told WP recently. “Not so with the investment industry. And that I think is the most important issue that Canadians face. And until that changes, it doesn’t matter about fees.”
Will it or won’t it, Bogle sees it getting done but not before some give or take from all the stakeholders involved.
“A fiduciary standard for investment advisors and brokers just has to be how this business is run. It’s the honorable way to run a business,” Bogle says. “I’m highly confident that we can get down in writing what we all know in our hearts is the right thing to do.”
  • Mark Matsumoto 2015-10-02 10:44:13 AM
    I think that a fiduciary standard is a move in the wrong direction. I believe that sellers have to be honest & upfront and people should decide what is best for themselves.

    People should always have their guard up and know that they have to look out for themselves. People are scammed because they go into things they don't understand because they don't have enough information or knowledge & trust that advisors & institutions are regulated.

    People get scammed by the few crooks in our business who don't play by the rules. Therefore implementing more rules won't stop the thieves. Telling people that it is OK to let their guard down will do more harm than good.

    Money spent on regulation should be spent on public education instead. There should be more guidelines requiring clear, understandable disclosure. Tell people not to invest in things they don't understand and if it "feels wrong" for them, it probably is.

    People are smart; much smarter than regulators want to give credit for. People can decide what they need better than the regulators.
    It is like socialism where government says that they are better at deciding what is best for me! The regulators have this socialistic mindset, so I think they are on the wrong track, going in the wrong direction.

    Regulation has increased costs, reduced choice, reduced access to advice for many people, all in the name of protecting people from being cheated. Giving adequate, useful information and knowledge would probably work better.

    Give people more disclosure, more knowledge. Teach them to fish.
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