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The Practice Blog: Sifting Through the Fiduciary Comments

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Of the thousands of comment letters that the SEC received before it started the formal study of putting brokers under a fiduciary standard of care, one of those letters, in particular, caught my eye.

It was from Nancy Lininger, the founder of The Consortium in California. Lininger is a consultant to broker-dealers and advisors, and I’ve talked with her many times over the years in reporting about compliance issues.

In her comment letter, Liniger looks into her crystal ball and tells the SEC what she foresees for the advisory industry’s future. “We will be under one regulatory regime. No longer will we have the broker-dealer and registered investment advisor industries. There will be one registration for firms, one fee, one filing. One registration for reps, one fee, one grand slam exam. One full disclosure document used by all to replace the Form ADV.

Lininger goes on to say that wealth management, life planning, asset management or simple buy-and-sell securities recommendations “will be done under one roof. There will be a choice of fee structures, based on client suitability. Some specialist firms will continue to exist–wealth management on one side of the spectrum and traditional brokerages on the other–but all under one regulatory scheme.”

Whichever the label, she continues, “fiduciary or suitability, it should be consistent for BDs and RIAs–but the label is just a label. There will be legal consequences for those that don’t follow the rules.”

Liniger argues, too, that a standard disclosure document is needed, “because clients don’t know if they are working with a BD or RIA–and should not have to know the difference.”

Indeed, investor confusion about which type of advisor acts as a fiduciary on their behalf is alive and well, as the mid-September release of a survey conducted by the Consumer Federation of America, AARP, the Investment Adviser Association (IAA), the CFP Board, and the North American Securities Administrators Association shows. The survey results confirm, once again, that the majority of investors are confused about which type of advisor is required to act as a fiduciary on their behalf, and that the majority of investors believe all financial professionals providing investment advice–including insurance agents–should be held to a fiduciary standard.

With industry and investor comments now in hand, the SEC certainly has a lot to chew on regarding how to put brokers under a fiduciary standard of care.


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