After six months of study required by the Dodd-Frank Act, the Securities and Exchange Commission (SEC) recently announced that all advisors, including brokers, should be held to a fiduciary standard because investors already assume their brokers are acting in their best interests. “Retail customers should not have to parse through legal distinctions to determine whether the advice they receive was provided in accordance with their expectations,” the SEC study noted.
Response was quick and positive from the Securities Industry and Financial Markets Association (SIFMA): “We support a uniform fiduciary standard of care for broker-dealers and investment advisers, and upon initial review we believe that the SEC has appropriately articulated a workable comprehensive approach for personalized investment advice for retail customers.” SIFMA further commended the SEC for not favoring one business model over another and asked the Commission to issue guidance to help firms enact this new standard.
I have long argued that brokers and investment advisors should be governed by a comparable standard of care. The SEC report is a step in the right direction, but does not specify a deadline for everyone to adopt the fiduciary standard. What’s more, it’s also unclear if the SEC will now re-define what it means to be a fiduciary and put your clients’ needs ahead of your own – in all situations. Also, it’s still unclear what organization will be charged with oversight and enforcement. In spite of all their work in the fiduciary debate, the SEC has instructed Congress it doesn’t have the resources to oversee advisors, noting that the best option would be for a self-regulatory organization like FINRA to serve in that capacity.
As we work toward changing industry definitions and regulations, those of us who have always worked as a fiduciary and puts clients’ needs first, continue to insist that the investing public deserves nothing less.