Both supporters and opponents of a fiduciary standard on sales of investment products have stepped up lobbying for their positions amid signs the Senate Banking Committee could unveil bipartisan financial services reform legislation as early as this week.
Several insurance industry trade groups view the issue as a make-or-break one.
For example, in a recent statement, Thomas Currey, president of the National Association of Insurance and Financial Advisors, said that “while the stated intention of these changes is to help consumers, in our extensive experience, they likely will have the opposite effect.”
Specifically, as defined by NAIFA and other insurance agent trade groups, the proposal would expand the application of the Investment Advisors Act to require all broker-dealers, “except for mere order takers,” to also become registered and regulated as investment advisers.
Doing so, Currey argues, “would subject broker-dealers to the Investment Advisor Act’s “fiduciary standard” based on the “praiseworthy but vague standard that an investment advisor acts in the customer’s ‘best interest.’”
The differing views come against the background of signs that Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, will unveil a bipartisan financial services reform legislation bill this week.
That is because Sen. Richard Shelby, R-Ala., ranking minority member of the committee, has apparently rejoined talks aimed at crafting a bipartisan package. Earlier, Dodd had said he would release the legislation he is working on with Sen. Bob Corker, R-Tenn., near the end of February and that a markup of the legislation would take place the first week of March.
Now, Dodd says his goal is a draft of the bill this week, with a markup of the legislation the week of March 11.
The committee has been focused on more controversial issues in the legislation, such as the authority of a proposed Consumer Financial Protection Agency, the authority of the Federal Reserve Board to oversee systemic risk, and the general authority of federal banking regulators.
What authority federal regulators will have over the insurance industry is another issue that remains unclear.
But life insurance agents are most concerned about the fiduciary standard issue. Industry trade groups are united on the issue. While NAIFA has taken the lead, the Association for Advanced Life Underwriting and the National Association of Independent Life Brokerage Agencies are also involved. The American Council of Life Insurers is also lobbying the issue strongly, if behind the scenes.
But, a proposed amendment circulated among committee members by Sen. Tim Johnson, D-N.D., is generating an angry response from supporters of the fiduciary standard, led by consumer groups and investment advisors.
Specifically, the language in the proposed amendment calls for the Securities and Exchange Commission to undertake a study designed to determine appropriate obligations of brokers, dealers, investment advisors, and their associated persons relating to the provision of personalized investment advice about securities to retail customers.