The National Association of Insurance and Financial Advisors says it is happy with the final standard-of-care provision in the Senate’s version of H.R. 4173, the Wall Street Reform and Consumer Protection Act.
Members of the Senate voted 59-39 Thursday to approve the bill, which previously was known as S. 3217, the Restoring American Financial Stability Act.
NAIFA, Falls Church, Va., has been battling financial planner groups over a section that could have required all providers of personalized investment advice to use a fiduciary standard of care.
Federal law now requires financial planners and other investment advisors to use a fiduciary standard, meaning that they must guard against conflicts between their own interests and those of their clients.
Broker-dealers, and life insurance agents licensed as representatives of broker-dealers, must abide by a suitability standard, which requires them to verify that the products sold to a consumer suit the needs of the consumer.
Life agents have argued that a poorly written fiduciary standard could be particularly onerous for life agents, because they often have contracts limiting them to selling products from one company, or a few companies, and cannot offer advice free of all potential conflicts of interest.
Lawmakers talked about adding a standard-of-care provision to H.R. 4173 that would have applied a fiduciary standard to life agents but eased the standard to accommodate the constraints on agents who have sales relationships with a limited number of product providers.
The standard-of-care provision in the version of H.R. 4173 that the Senate passed requires the U.S. Securities and Exchange Commission to study the issue, develop regulatory proposals based on its findings, and report back to Congress in 18 months.
“The assessment called for in the Senate bill has never been done,” NAIFA President Thomas Currey says in a statement.
The need for applying a fiduciary standard to all advice providers is “unsupported by any factual findings,” Currey says.
“NAIFA believes the best way to protect consumers from bad actors is through strong and effective supervision within financial services firms, and regular, periodic inspections by the SEC and other regulatory bodies,” Currey says.
The Consumer Federation of America, Washington, has attacked the lack of universal fiduciary standard requirement, arguing that the bill now does nothing to ensure that brokers put customers’ interests ahead of their own when giving advice.