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Unsung Heroes in the Rise of a Fiduciary Standard

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I’ve written many times over the years about how Ron Roge and other members of the NAPFA board virtually singlehandedly drove fee compensation for advisors to the widespread acceptance it enjoys today. Largely through the efforts in the 1990s of Ron, who became head of NAPFA’s media relations committee due to the proximity of his Long Island practice to New York City, they doggedly lobbied the mainstream media into seeing fees as a more client-centered way to structure an advisory relationship.

One of the results of their campaign was tremendous pressure on Wall Street brokerages to convert to fee-compensated asset management, which they have done. That, in turn, led to the debate over whether brokers had transitioned into investment advisors, with a corresponding fiduciary duty. The result was the Obama Administration’s request for a fiduciary duty for brokers, and the inclusion of fiduciary language in both the House and Senate versions of financial services reform.

As you’re undoubtedly aware, the broker fiduciary duty was dropped from the Senate bill, but is still alive in the form of being turned over to the SEC in the House version. Whether that fiduciary duty will survive the Congressional reconciliation process (after the Senate finally passes its bill) is anybody’s guess. But whether brokers end up with a duty to put their clients’ interests first in this legislation, it seems to me that a universal fiduciary duty is an idea whose time has undeniably come: Washington insiders now understand the issues at stake, the financial media is writing about it, and consumers are finally realizing that their brokers and agents currently aren’t required by law to be on their side of table. Even SIMFA has realized the futility of fighting a fiduciary duty.

From my vantage point out here in Santa Fe, it looks as if this snowballing public acceptance of a fiduciary duty for all financial advisors is the result of the same small-group-making-a-large-impact phenomenon that Ron Roge & Co. personified two decades ago. While there have been many groups advocating the cause of a fiduciary duty, it seems to me the greatest impact by far has been made by the Committee for the Fiduciary Standard, which was formed a year ago by Knut Rostad, of Rembert Pendleton Jackson in Falls Church, Virginia. Armed with a simple five-point description of what a true fiduciary duty is–which makes the client-centered nature of a fiduciary obvious–members of the Committee (at their own expense) relentlessly lobbied Congressmen, regulators, and the Administration. The people they talked to couldn’t help but “get it.”

They have, almost singlehandedly, created an awareness of the need for an advisory fiduciary duty that has begun to take on a life of its own. I predict that years from now, people will look back at this time as the turning point for the fiduciary duty, and regard the steering group of the Committee–Blaine Aiken, Clark Blackman, Gene Diederich, Harold Evensky, Sheryl Garrett, Roger Gibson, Matthew Hutcheson, Gregory Kasten, Kate McBride, Ron Roge, and of course, Knut Rostad–as the folks who made it happen.


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