In my last blog, Wall Street Finally Blinks in Fiduciary Standoff, I suggested that "Until now the securities industry has done a masterful job of deflecting initiatives to force its member firms to act in the best interests of their clients. It's just possible that this time—ironically, due to its own efforts—it really might be different."
Teresa Vollenweider responded with the following post: "I certainly hope so, and I am willing to fight tooth and nail to make it so. Finally, yes, finally, the fact that Wall Street and its so-called advisers/advisors (who are nothing more than product peddlers) have been ripping off the retail investors and small [retirement] plans (business owners and employees) for years is finally seeing the light of day via the mainstream media…"
Teresa raises the Bonus Round question: How can proponents of a fiduciary standard for all retail advisors/advisers most effectively focus their "tooth and nail" efforts?
To get some answers, I had a conversation with the newly elected chair of the Committee for the Fiduciary Standard (the Committee) Kate McBride, (former editor-in-chief of Wealth Manager magazine, and founder and current CEO of FiduciaryPath, LLC) and a founder of both the Committee and the Institute for the Fiduciary Standard (the Institute).
In case you're wondering, as Kate tells it the difference between the two groups is that the Committee sees the current fiduciary fight to be short term, focused on a fiduciary standard for brokers under Dodd-Frank and the Department of Labor's current attempts to expand fiduciary protections for retirement plan investors. By contrast, the Institute, under its current chair Knut Rostad, believes that fiduciary protections will require ongoing advocacy.
Frankly, it's not clear to me why the two groups couldn't have stayed together, letting individual members decide when their work was done—and saved us all a lot of brain damage. But Kate makes a good case for the status quo: "I don't think there are any philosophical differences between the two groups. In fact, some of us are involved with both. But I do believe that when it comes to influencing outcomes, two voices are better than one. Until there is a legal and/or regulatory underpinning that's makes all 'financial advisors' fiduciaries, clients can't be sure that their 'advisor' is acting in their best interests."
Rather than coming out with "best practices for fiduciary advisers," as the Institute recently did (and which fi360 has had for years), Kate's Committee has focused on publishing information to help guide lawmakers, regulators, and financial consumers, including its "Five Core Principles of the Fiduciary Standard" and excellent "Fiduciary Disclosure Letter" for advisors to sign and hand out to their clients. The Committee is also focusing on lobbying both regulators and lawmakers to increase investor protections.
"The Committee is currently engaged in the discussions around the Department of Labor's Conflicts of Interest proposal that would update decades-old rules on advice to retirement investors and plans," she said. "The Committee hopes the DOL will close loopholes that for years allowed many brokers and insurance reps to sell high-commission products to retirement plans and investors."
As part of those efforts, McBride recently sent a letter to Sen. Ron Johnson, chair of the Senate Committee on Homeland Security & Governmental Affairs in response to his letter to the DOL voicing concerns that its proposal would reduce access to "advisors," stating in part: "Your letter has it backwards. Small investors and savers are the ones being victimized by current practices of the big Wall Street and insurance companies…Your statement that a rule requiring fiduciary advice 'could adversely affect middle to low-income Americans access to investment advice,' is just not true," then cited various studies to support her claims.
Kate says the Committee is also very engaged on the issue of advisory "titles," which she said are currently "so misleading. They need to actually describe the relationship an intermediary has with clients and with their own firms (as agents, or representatives, etc.). A big part of the problem is the media, falling into the trap of referring to all financial intermediaries as adviser or advisors, instead of brokers or registered reps or insurance agents or wealth managers. Sadly, some media is referring to all intermediaries as 'advisers.' Case in point: the sadly named 'WSJ Adviser,' effectively bastardizing RIAs' legal title."
