NAIFA President Terry K. Headley is calling the Consumer Federation of America’s claim that a fiduciary standard of care would better protect consumers “a myth.”
Responding to a letter the confederation sent to Congress, Headley issued a written statement saying, “The Consumer Federation of America’s claim that the fiduciary standard of care provides better protection for consumers is a myth. In fact, some members of Congress have written to the SEC to request further economic analysis of the impact a fiduciary standard of care could have on the marketplace.”
Headley pointed out that a fiduciary standard could actually hurt middle-market consumers. He cited a recent NAIFA survey in which 65% of respondents said that if the implementation of a fiduciary standard were to increase their compliance costs by at least 15%, they would need to take actions such as limiting their practices to affluent clients, declining to offer securities products and implementing or increasing fees. Surveyed members reported that they already spend an average of more than 500 hours and nearly $9,000 a year to meet current compliance obligations.
Headley voiced his support for the suitability standard, calling it “robust and heavily enforced.” He pointed out that NAIFA members are already subject to annual compliance reviews by their broker-dealers as well as daily broker-dealer-enforced compliance procedures. Annuities products often carry additional regulations.
“There is no evidence to support the claim that the fiduciary standard has provided consumers superior protection in comparison to the protection provided by the suitability standard,” he wrote.
Headley called on government to research the implications of a fiduciary standard, writing, “We therefore support Congress and the SEC for doing the necessary due diligence to ensure a change doesn’t result in unintended consequences for investors.”