The proposed standards move financial planners towards professionalism on a number of fronts. Two stand out. One, in a sharp departure from the current standards, all CFPs who render financial advice are held to fiduciary conduct. Two, in the proposed standards conflicts begin to be addressed.
Legislation and Rulemaking
Fiduciary September 2014 Special Webinar with five panelists: John Taft (JT), RBC Wealth Management, Michael Falk, Focus Consulting Group, Jack Waymire, Paladin Registry, David Armstrong, WealthManagement.com, and Knut A Rostad (KR), Institute for the Fiduciary Standard
On July 14, 2011 SIFMA submitted comments to the SEC on a proposed framework for establishing a uniform fiduciary standard of conduct for broker-dealers. SIFMA’s proposal departs from the fiduciary standard as set forth under the Advisers Act of 1940 and, if adopted, would be particularly harmful to retail investors.
Contrary to what some of the comments received by the DOL/EBSA suggest, fiduciary duties are neither too “ill-defined” nor “vague” to be applied to investment advisory activities. Such duties have been applied to other professionals for centuries. Additionally, there is a significant body of case law applying fiduciary duties of due care, loyalty, and good faith upon the activities of investment advisers (both at the federal and state level).
Disclosures and client consent are insufficient – by themselves – to satisfy the fiduciary standard. Investors must be able to rely on and have confidence in the expertise of their advisor. This can only be accomplished by applying a standard that prohibits all conflicts of interest.
Certain comments made by Kenneth E. Bentsen, Jr. of SIFMA before the U.S. Department of Labor hearing on the proposed definition of fiduciary regulation were either misleading and/or not relevant to the issues under consideration. The DOL should carefully scrutinize the (flawed) arguments of those organizations opposed to a bona fide fiduciary standard of conduct.