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December 01, 2009 at 02:00 AM
Days after Sen. Chris Dodd (D-Connecticut), the chairman of the Senate Committee on Banking, Housing, and Urban Affairs, introduced on November 10 a sweeping plan for financial services reform that would including a fiduciary duty for brokers who provide investment advice (see page 15), SEI Advisor Network and The Committee for the Fiduciary Standard released findings of a survey intended to gauge how well brokers and investment advisors understand a fiduciary standard and whether they support such a standard.
The November 10 draft of the Senate’s plan includes a requirement that “Brokers who give investment advice will be held to the same fiduciary standard as investment advisers–they will be required to act in their clients’ best interest,” according to the Banking Committee’s summary.
“The Fiduciary Standard Survey” of 890 brokers and investment advisors shows that a “majority of brokers support the fiduciary standard,” according to Knut Rostad, regulatory and compliance officer at Rembert Pendleton Jackson, a Falls Church, Virginia, RIA firm. Rostad is chairman of The Committee (this writer is a member of the Committee as well). There was a “high level of understanding and agreement between brokers and advisors on key elements of the fiduciary standard,” Rostad noted.
Some surprising attitudes are found in the survey responses. A majority of brokers–53%–”believe all financial professionals who give investment and financial advice should be required to meet the standard.” An even higher 86% of fee-only and fee-based investment advisors agree. In this study, the term “brokers” includes those who are compensated by commissions only as well as those who receive a combination of commissions and fees. “Investment advisors” are defined to include both fee-only and fee-based advice givers.
Perhaps the biggest revelation in the survey’s findings is, “the support among brokers for the fiduciary standard in light of the industry’s historic opposition to it,” Rostad says: 61% of brokers and 89% of investment advisors say that they “should not be allowed to ask their clients to waive the standard of care.”
There is significant agreement between brokers–75% agree–and investment advisors–82% agree–that, “All professionals who provide financial or investment advice should be required to put the clients’ best interest first at all times.”
