A Stand-in For The Fiduciary Standard?

moneyMy Comments: I apologize for continuing to push this issue. But as a fiduciary, I’m bound to give advice that results in what is best for the client, legally, morally and ethically. That Wall Street firms resist this is not in your best interest.

Meanwhile, I received an angry call this week from a group that for now will remain nameless. The caller proceeded to rip me new one as I had borrowed an article that, according to him, belonged exclusively to his organization and I’d used it without specific permission. I was to take it off the web site immediately or face the consequences.

I have neither the time nor inclination to fight a losing battle, so I took it down. Never mind it was posted last October, attributed to the author, a prominent attorney and as coming from the organization in question. I was assailed for using other peoples ideas in my posts, never mind that they arrived unsolicited in my email inbox in the first place. My objective with this blog is to share what I consider good ideas and give credit to whomever is deserving.

I’ve been doing it this way now for four years and this is the first time I’ve been called or contacted in a critical manner. I intend to keep sharing stuff with whomever reads this blog. If you choose not to read any of it, that’s OK. But I still think all of us in this business who interact personally with clients need to be held to a fiduciary standard.

Mar 03, 2015 | By Allen Greenberg

With sincerest apologies to Walt Whitman:

O Fiduciary! My Fiduciary! Our fearful trip is (nearly) done,
The rule has weather’d every attack, the prize we seek is within grasp,
A new standard is near, the lobbying I hear, the people all exulting.

I don’t know about you, but I’m certainly “exulting.” Not just because the regulatory sausage-making may soon be done but because, frankly, I’ve heard enough of the Department of Labor’s wait-for-it, it’s-coming-any-moment-now, soon-to-be-unveiled fiduciary standard to last a good, long while.

This intensified soon after since President Obama announced his endorsement of the DOL’s plans to unveil its newly crafted fiduciary rule last week. But it actually began last summer, as speculation started to build about just when the DOL would move forward.

Of course, most of America couldn’t tell you whether a fiduciary was a noun, verb or something that happens after you eat too much Italian food. According to a recent AB Global survey, even plan sponsors are “confused or misinformed” about the fact that they themselves are, in fact, fiduciaries (30 percent fail to realize this). The sad fact is that investors are confused, too.

A campaign to help investors identify true fiduciaries “committed to objectivity, transparency, and plain English communications.” As reported by Barron’s this week, a survey by Opinion Research Corp. in 2010 of 1,319 investors found that 60 percent wrongly assumed that stockbrokers were already held to a fiduciary standard.

Not surprisingly, 90 percent wanted their brokers held to the fiduciary standard after being told about the difference between the fiduciary standard and the “suitability” standard that brokers are supposed to meet.

The Institute for the Fiduciary Standard understands this very well, which is why it has come up with an 11-point plan for anyone hoping to behave like a fiduciary, instead of, you know, posing as one.

Here’s a link to the IFS’s best-practices proposal. As you’ll see, there are items about acting in good faith, keeping fees under control, avoiding conflicts of interest, steering clear of soft-dollar commissions and third-party payments and more.

If a lot of Wall Street and its allies come off as acquisitive in this debate, Knut Rostad, president of the IFS, is our story’s hero, an even-handed player interested in doing more to protect investors without crippling the brokers.

“We hope brokers look at them seriously,” he said recently in speaking about his group’s best practices. “They were crafted with an explicit objective of being open to having brokers meet the practices … without lowering the standards.”

The institute’s proposal will be open for public comment until Monday. The organization’s board is expected to give final approval over the summer.
By that point, the DOL could be in the midst of multiple hearings on its fiduciary standard. Months later, perhaps many months later, it might have something hammered out.

Somebody in Congress – perhaps someone as powerful at Sen. Orrin Hatch – could then throw the proverbial wrench into the works with legislation that would make the DOL’s efforts moot.

Oh, wait, Hatch’s Secure Annuities for Employee Retirement Act already includes a provision that would do just that.

So, what’s the bottom line? The chances of a broader DOL fiduciary rule any time soon seem slim. The IFS version lacks regulatory bite, but at least we’d be doing something and then can get on with the next voyage in our lives

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