More On Legal & Compliancefrom The Advisor's Professional Library
- Recent Changes in the Regulatory Landscape 2011 marked a major shift in the regulatory environment, as the SEC adopted rules for implementing the Dodd-Frank Act. Many changes to Investment Advisers Act were authorized by Title IV of the Dodd-Frank Act.
- Advertising Advisor Services and Credentials Section 206 of the Investment Advisers Act contains the anti-fraud provision of the statute and ensures that RIAs advertising and marketing practices are consistent with the fiduciary duty owed to clients and prospective clients.
(This article originally appeared on WealthManagerWeb.com on April 22, 2010.)
Sallie Krawcheck, president of Bank of America Global Wealth and Investment Management, has been on a "listening tour," discussing with clients what it is they want from advisors. In a speech on April 22 to Securities Industry and Financial Markets Association (SIFMA), in New York, she noted that the brokerage industry has a "choice of two roads."
Acknowledging that, "the full service wealth management industry has lost share for the past decade to the independents, the on-line brokers, the retirement providers, and most recently, to the regionals," she suggested that the industry needs to change. She noted that the industry has "real problems in the eyes of our clients and the public."
Krawcheck also said: "as an industry, the regulators are still upset with us, the public at large is still irate with us, some numbers of the industry's clients are still angry with us, or some other number is bewildered by us."
Broker/dealers can either "stay the course," Krawcheck said, or change "our focus to our clients." She suggested that the industry re-imagine itself and, "do right by our clients by embracing our fiduciary responsibility for them."
Clients: "I have no idea what fiduciary is, but it sounds good..."
"Our clients simply say, 'I have no idea what fiduciary is, but it sounds good so just please put my interests in front of yours and do what is right for me.'" She added that, "embracing reform will enable us to champion what is indisputably right for clients."
This makes her the first head of a major retail brokerage firm (about 16,000 reps.) to say they embrace the fiduciary standard. Goldman Sachs CEO Lloyd Blankfein endorsed the extension of the fiduciary standard to brokers who provide advice in his testimony before the Financial Crisis Inquiry Commission in January, but his firm is not considered a retail firm. (See related article, "Smart Money.")
In a survey of broker/dealer reps. and investment advisors in November, by SEI and The Committee for the Fiduciary Standard, the majority of brokers--53%--"believe all financial professionals who give investment and financial advice should be required to meet the standard." This editor is a member of The Committee for the Fiduciary Standard.
Krawcheck has been in Washington often of late, along with Bank of America CEO Brian Moynihan, and she noted that financial "reform is inevitable," and then went a step further saying: "it is bad business to fight the inevitable, particularly when the inevitable is better for clients."
Recalling the wisdom of Peter Drucker, Krawcheck quoted him saying: "Management is doing things right; leadership is doing the right things."