Less than two months after the Department of Labor issued its final fiduciary rule for financial advisors, the nonprofit Institute for the Fiduciary Standard launched its Campaign for Investors, to educate investors on their rights when working with advisors and to provide advisors with guidance on how best to act in their clients' interests.
The launch event at the National Constitution Center in Philadelphia, which included Vanguard founder John Bogle and DOL fiduciary rule architect Phyllis Borzi, focused on the impact of the fiduciary rule on advisors and their clients but also on future regulation.
Borzi said it will be up to consumers to enforce the rule through "state contract actions." Addressing the audience, Borzi said the Labor Department is going to rely "on all of you.… I'm deputizing you all … to help us monitor what's going on in the advice community."
The indefatigable Bogle applauded the rule but noted the confusion that will ensue if advisors treat retirement assets of clients — now covered by the DOL rule — differently from clients' other assets and treat clients with retirement accounts different from those without those accounts at their firm.
"As a practical matter I can't imagine brokers serving nonretirement clients with a lower standard of care," said Bogle. He urged the Securities and Exchange Commisison to follow the Labor Department and finally adopt its own fiduciary standard for brokers but noted that the application of a fiduciary standard should not stop there.
"A federal standard of fiduciary duty … must be applied to every person and every entity that even touches other people's money … and must also include institutional money managers," said Bogle.
Republican members of Congress couldn't disagree more. They voted in favor of a House and Senate resolution to block implementation of the DOL fiduciary rule, which passed, but at this point they lack the two-thirds majority to override an expected presidential veto.
Borzi, who is an assistant secretary of Labor and oversaw compliance with the Affordable Care Act, called the congressional votes and threats of lawsuits from opponents of the rule "the usual Washington Kabuki theater. We think we've done a really good job for investors. We know the journey is just beginning."
All of the panelists at Tuesday's meeting discussed the rule as a done deal that will affect advisors and investors and change the advisory and investment management industries.
Bogle, creator of the first retail index mutual fund, and others expect index funds will grow even more popular while commission products take a hit as a result of the rule.
