A True, Genuine, Authentic, ‘40 Act-like Fiduciary Standard: Clark at Large Blog

Me: “It’s up to the courts only to the extent the law reads that way. So far, the Dodd-Frank Act has carved out proprietary funds and commissions, neither of which true fiduciaries can be involved in. If SIFMA has its way, we'll have another two dozen similar carve outs and brokers’ behavior won't change one bit.”

Him: “There you go again with an adjective: ‘TRUE’ Fiduciary.  I am not 100% sure about the proprietary funds, though, being a disallowed product from a “true “ fiduciary.  However it seems as if you are saying that a proprietary product is always inferior, I am not sure that is an accurate assumption.”

Notice how opponents of the a fiduciary standard for brokers are quick to broadly generalize (putting words like “always,” “never,” “every,” or “none,” in someone else’s mouth), in sophomoric attempts to make people who don’t agree appear ridiculous, and distract attention for the real point. In this case, “a proprietary product is always inferior” just sounds like it can’t be true. But of course that’s not the point. Proprietary products simply come with so many major conflicts of interest that it’s very hard to recommend them and still fulfill a fiduciary duty. And if a fiduciary does recommend one, the onus is on them to absolutely, positively show that the client is better for it.

But the real point is that to hear them tell it, SIFMA and the FSI embrace a “fiduciary” standard for brokers. It’s just that with all the carve outs, exceptions, and clever definitions, it’s not the same as the ‘40 Act standard, or any other established fiduciary standard. So, to be clear, those of us who advocate a ‘40 Act-type standard for all financial advisors feel the need to make that clear, through the use of adjectives such as “authentic,” “genuine,” or “true.” I’m sure we all wish that wasn’t necessary, but in the Real World…