Family Office Leaders Call for Fiduciary Standard

President, Threshold Group, LLC

Thomas R. Livergood

CEO, Family Wealth Alliance , LLC

Charles J. Maxwell

Chairman & CEO, Meristem

Carol Pepper

Founder & CEO, Pepper International

Steve Prostano

President, Silver Bridge Advisors

“Investors need to understand the important differences between advisors and brokers who meet the fiduciary standard versus those who only meet the minimum requirements of the suitability or commercial sales standard. Most fundamentally, fiduciaries are hired to represent investors, while those following the suitability standard are permitted to represent their firms’ interests, first. This is a huge difference. For example, fiduciaries must tell clients in writing how much they pay for the services and products they buy; they must either avoid or reveal and manage conflicts of interest, attaining informed client consent; and they must also control investment expenses. Those who just meet the minimum suitability standard are not required to do any of these things,” Gregory Curtis, Chairman of Greycourt & Co., Inc., explained in the announcement.

“These firms serve wealthy investors worldwide. Their vocal support to extend the fiduciary standard to all investors speaks volumes of their professionalism and commitment to industry excellence,” noted Knut A. Rostad, chairman of the Committee for the Fiduciary Standard. The committee, founded in 2009, advocates “for the fiduciary standard as established under the Investment Advisers Act of 1940.”

Deputy Secretary of the Treasury Neal Wolin said May 27 in a speech to FINRA that the fiduciary standard won the “gold medal.” It was number one among the five issues Wolin said the Administration will push for in the final Wall Street reforms bill. House Financial Services and Conference Committee Chairman Barney Frank is also widely believed to put the fiduciary standard at the top of his list.

As SEC Commissioner Elisse Walter noted in a May 5, 2009 speech:

“When your Aunt Millie walks into her local financial professional to ask for advice, she does not need to know whether the person on the other side of the table is a registered representative of a broker/dealer or an investment advisor. She should not be placed at risk by the fact that application of those labels may lead to differing levels–or at least different kinds–of protection. Instead, she should know, or be able to assume–consciously or subconsciously–that regardless of the title held by the person sitting across the desk from her, she will receive an appropriate and comparable level of protection…

“I believe that every financial professional should be subject to a uniform standard of conduct. In my view, that standard should require all financial professionals to act as fiduciaries at all times.”

American leaders, including President Barack Obama and industry statesman and Vanguard founder, John Bogle; SEC Chairman Mary Schapiro; CFTC Chairman Gary Gensler; along with editors and columnists at The New York Times; and columnist Jason Zweig of The Wall Street Journal have all called for the extension of the fiduciary standard to brokers who provide advice to investors.

Kate McBride ([email protected]) is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.