More On Legal & Compliancefrom The Advisor's Professional Library
- Where Are We Headed? The ultimate compliance goal is to help ensure that everyone associated with an advisory firm acts ethically at all times. Advisors and RIAs should do the right thing, even when regulators are not looking over their shoulders.
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
The Financial Planning Coalition delivered a letter to the Securities and Exchange CommissionThursday, accompanied by a petition signed by 5,200 financial planners, urging the SEC to apply a fiduciary standard to anyone providing personalized investment advice to retail clients.
“The Coalition appreciates the leadership you have shown in your support of a fiduciary standard for advice provided to retail investors,” the letter said, which also sent to members of Congress. “We are deeply concerned that current regulations governing the delivery of personalized investment advice are insufficient to protect investors.”
The coalition is comprised of the Financial Planning Association, Certified Financial Planner Board of Standards and National Association of Personal Financial Advisors.
In its letter, the Coalition urged the SEC to use its authority under Section 913 of the Dodd-Frank Wall Street Reform and Consumer Protection Act to establish a strong and uniform fiduciary standard of conduct for broker-dealers and investment advisers that is no less stringent than that under the Investment Advisers Act of 1940. The Coalition continues to advocate for rulemaking that would establish this uniform fiduciary standard.
“The Financial Planning Coalition and thousands of financial planners across the nation believe that those who provide personalized investment advice to retail clients should be held to a fiduciary standard,” stated the letter. “Requiring advisors to act in their clients’ best interests should help restorethe confidence of millions of American investors in the securities markets and facilitate the needed return to the markets as the economy continues to recover.”
The Coalition’s petition, the text of which is provided below, urged the SEC to move forward with the rulemaking.
Fiduciary Standard for Financial Professionals
We, the undersigned, believe a fiduciary standard should apply to anyone providing personalized investment advice to retail clients.
Following a fiduciary standard is simple: it includes providing clients with advice that is in their best interest without regard to compensation or other interests. Full disclosure of all material conflicts of interest is essential, regardless of how the advisor is compensated.
Most consumers assume their financial services providers are already required to provide advice that is in their best interest. Unfortunately, this is not the case. As a financial service provider, I can choose to operate under different regulatory structures, each with different standards and requirements for how I treat my clients. Some require me to put my clients’ financial interests ahead of my own, some do not. But there is no easy way for consumers to distinguish.
In a report issued in January 2011, the SEC recommended that the fiduciary standard be extended to all professionals providing personalized investment advice. Requiring financial professionals to act under the fiduciary standard is a common sense way to greatly increase consumer financial protection.
As a financial service provider, I believe that those who provide personalized investment advice to retail clients should be required to act in their clients’ best interests. I urge the SEC to enact a rule implementing a fiduciary standard so millions of American consumers can be guaranteed that the financial advice they’re getting is in their best interests.