An intense effort to create a uniform fiduciary standard remains unresolved after more three years of effort, something insurance agents and investment advisors should be concerned about.
The only thing that is certain from all this effort is that two terms have been added to the lexicon governing the appropriate standard for securities oversight going forward: “business-model neutral” and “economic impact analysis.”
“Business-model neutral” is shorthand for the position advocated by the National Association of Insurance and Financial Advisors.
According to NAIFA vice president of securities and state government relations, Gary Sanders, NAIFA has been concerned from the beginning that imposing a universal fiduciary duty of care on broker-dealers and their registered representatives would make it difficult or even impossible for such advisors to serve the middle market investors.
He feels that NAIFA’s members help protect the financial well-being of countless Americans and that mid-market investors would be harmed if they were left without access to financial products and professional advice and service due to the unintended consequences of a poorly crafted standard of care rule.
But the industry is divided because, unlike insurance agents, investment advisors (many of whom get paid by commission) support the fiduciary standard.
The economic impact analysis issue is also divisive. Both the Securities and Exchange Commission and the Department of Labor are paying particular attention to this because an SEC rule implementing a proxy access standard was thrown out by a panel of the U.S. Court of Appeals for the D.C. Circuit, which said the potential impact on capital formation and competition was not extensively weighed by the agency in the rule.
When asked to provide data to the Department of Labor on account-level IRA data, both NAIFA and the Financial Services Institute declined to respond with substantive information.
NAIFA sent a letter Feb. 17 to the DOL saying that it was not feasible for the group to obtain any of the data enumerated in a Dec. 15 data request. NAIFA went on to say that the relationship of its members and affiliated companies is such that even if the association members could get access to client or company data, they probably would not have the legal right to share it.
The Financial Services Institute sent a similar letter of its own to the Department of Labor, saying that its ability to provide data to the DOL is very limited.