It’s looking more and more like an attempt to extend the fiduciary standard to all financial services professionals will not be a part of any financial services regulatory reform legislation any time soon.
What was billed by proponents such as the Barbara Roper, director of investor protection for the Consumer Federation of America, as the “single most important provision in the legislation to enhance protection for average investors,” may well end up on the cutting room floor.
While Sen. Christopher J. Dodd’s (D-Conn.) massive draft bill unveiled back in November contained a provision that would have made it a requirement for stock brokers and insurance agents to act in the best interest of their clients, recent developments indicate that provision may be replaced with legislative language from an amendment by Sen. Tim Johnson (D-S.D.) directing the Securities and Exchange Commission (SEC) to study the varying rules that govern brokers and advisors within 18 months.
Articles within the past week in The New York Times and The Washington Post each pushed the idea that the financial reform bill will likely not contain Sen. Dodd’s original provision in favor of Sen. Johnson’s amendment. While consumer groups expressed disappointment at what they see as a move by lawmakers to delay confronting the problem, thanks in large part to what is viewed as intense lobbying by Wall Street and insurance firms, such a delay to further study the issue is just what some in the industry consider vitally important and necessary.
Last week I interviewed Dr. Larry Barton, president and CEO of The American College, for a cover story for the April issue of Life Insurance Selling. He had plenty to say on the matter, including that he actually supports a fiduciary standard, as The College traditionally has. But he has serious concerns about how Congress is going about it, particularly if Sen. Dodd’s original provision was to be a part of the financial reform bill. He does favor additional study of the issue with input of policymakers, insurance agents and independent financial advisors to consider fiduciary standards and the public’s best interest.
“I can understand why people are dismayed,” Barton told me. “But in seeking to have swift legislation, you might end up hurting the financial security of the very people we’re trying to protect. And that’s insanity.”
Do you think we’re ready for a fiduciary standard right now? Whether you do or not, please feel free to share your opinions and extend the discussion via the comment box below
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