More On Legal & Compliancefrom The Advisor's Professional Library
- Scope of the Fiduciary Duty Owed by Investment Advisors A fiduciary obligation goes beyond the suitability standard typically owed by registered representatives of broker-dealer firms to clients. The relationship is built on the premise that the advisor will always do the right thing for the person or entity receiving advice.
- Meeting and Exceeding Clients and Regulators’ Expectations Although it can be difficult, there are ways for RIAs to meet or exceed client expectations, increase customer satisfaction, and help firms retain current clients and attract new ones.
The American College, which provides educational exams for the Certified Financial Planner mark and other planner designations, supports an amendment to the Investor Protection Act by Rep. Dan Maffei (D-New York) that would exempt some advice-givers from a fiduciary standard because "we don't believe that a 'one-size-fits-all' fiduciary standard is in the best interest of consumers," says Keith Hickerson, senior strategy consultant at the College. "That approach works fine with a fee-based business model, but it becomes much more challenging when an advisor is serving as a fiduciary for the client but is contractually obligated to primarily represent the company at the same time." An advisor who is an employee of a company has certain obligations to that company, Hickerson says, "such as to market, in some cases, a limited or preferred product set." This concept of a one-size-fits-all fiduciary duty "is even more problematic when it's considered for all intermediaries, not just brokers, dealers, and investment advisors, such as an insurance agent with risk management responsibilities, for example." Hickerson adds that the only way to implement a "fiduciary duty for all" is with a "fee-for-service model, and few consumers choose that approach. It has negative implications for cost and consumer access to the products and services they currently enjoy."