Debate on Fiduciary Is Over; Battle for ‘Best Interest’ Rages On

The outcome of the battle is also uncertain despite two interesting facts that get little attention. First, the case for trusted advice is broadly compelling and accepted and found in history, law, research and common sense. A compelling case such that outside Washington, many observers ask what is the "debate?"  The answer is, nothing. In that, there is no debate. Curiously, industry advocates implicitly acknowledge as much.

The second fact is that industry advocates neither challenge nor refute the case for trusted advice. They do not refute the core merits, rationale and case for fiduciary duties. They do not challenge the writings of professors such as Frankel, Laby and Bullard which set out the case for fiduciary duties and why they matter. This leaves industry advocates left to argue, unpersuasively, about costs and economics. Or alternatively, and even more unpersuasively, that fiduciary duties harm investors. 

Still, the battle rages on, and in a manner that CFA Institute Managing Director Kurt Schacht just described as "a national disgrace with investors getting the short end of the stick." These are tough words that are on point considering the magnitude of the cynicism at play. Wall Street lobbyists continue to publicly cheer for, and/or claim to support, a "Best Interest" standard, all the while lobbying vigorously against it.  

Looking ahead, the dynamics of the battle will change. It's a new world where the battle will be far more influenced by market forces. New investor attitudes and aptitudes matter greatly. As do products, technologies and digital offerings that have already started to disrupt the landscape and raise awareness and expectations on what constitutes reasonable fees, breadth of services and transparency.

Advisors can make a difference in this battle in this new world. They can speak out for fiduciary advice and, as important, against visible faux fiduciary actions and practices. They can demonstrate to skeptical investors how they and some advisors merit their trust and confidence – not just in words, but in deeds. And how some advisors do communicate plainly and clearly and truthfully and do act transparently in their clients' best interest. And that they follow written practices that are concrete, verifiable, and understandable and reflect true fiduciary duties. Those advisors already effectively follow the Institute's Best Practices for Financial Advisors.