In case you missed it, there’s a very interesting discussion following my last blog “Fiduciary Advocates: Call Out SIFMA and NAIFA.” True, it revolves around the same key issues that opponents of a universal fiduciary standard typically cite, namely, investor cost and choice. But in this case, Christian, who raises them, is an admitted lawyer as well as an advisor, and perhaps that’s why his points are far more reasonable than the usual blatantly self-serving responses I tend to get from my posts. Of course, that doesn’t mean that they hold any more water, just that they warrant more analysis.
The heart of Christian’s comments is captured when he writes: “Application of a fiduciary standard [to brokers] really only matters to the investing public when there is litigation and changing the standard of care will raise costs and effectively eliminate commission based advisory.” The first part of his argument is interesting, in that it sounds reasonable, in a lawyerly way. Yet upon closer examination, its contention—that laws only matter when they are broken—runs contrary to both common sense and to our experience.
Could we say the same thing about any law? A law governing driving, for instance? Speeding limits only matter to the public when speeders are brought to trial. Obviously, this would be silly. The effect of traffic laws, and most other laws, isn’t what happens if one is caught, but that the prospect of getting caught causes us all to behave in a more responsible way. I have to admit, that there have been times when on my Harley, I might have ridden faster, were it not for the prospect of a speeding ticket. I suspect that most of us have had similar experiences.