More On Legal & Compliancefrom The Advisor's Professional Library
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
“We support the concept of a fiduciary standard” for all advice-givers, said Scott Curtis, president of Raymond James Financial Services, but he argued in a Tuesday interview that “it hasn’t been defined to the FA level.”
Until it is defined to that level, said Curtis during RJFS’ annual conference for independent contractor reps, it would be imprudent to speak about embracing fully such a standard.
Curtis (left) was speaking at the annual Raymond James Financial Services' National Conference for Professional Development for RJ's independent broker-dealer representatives. In January, Curtis became president of RJFS, succeeding Dick Averitt, who on Monday was lauded for his long leadership of the group (Averitt remains chairman of RJFS).
In a media rountable during the conference in Orlando, Curtis recalled attending a session at the Financial Services Institute’s annual conference earlier this year where one independent broker-dealer executive suggested the industry should just move ahead and embrace a fiduciary standard. On Tuesday, Curtis said he thought at the time, and still does, “Move ahead with what?” and then raised the question of whether the standard should be the SEC’s or the Department of Labor’s.
Take the issue of conflicts of interest, Curtis suggested. Under the SEC’s fiduciary standard, when a conflict of interest arises between an advisor and a client, the conflict must only be disclosed to the client. Under the DOL’s ERISA fiduciary standard, however, such a conflict, Curtis said, “must be eliminated.” Under that standard, he argued, an advisor would be prohibited from selling a client a bond, for example, if his broker-dealer “made a little money” from selling the bond.
Then there is the related issue of what in fact constitutes an advisor acting in “the client’s best interest.” Does that mean that the cheapest investment alternative is always in the best interests of the client, Curtis wondered, pointing out that advisors have different investment approaches—some believe in the cheap index approach, others favor picking active money managers—that might conflict with recommending merely the least expensive product available.
“There’s great complexity here,” Curtis concluded. “Let’s define it first” and then move on.