A study released in early March by two academics goes a long way in settling one of the stickier questions surrounding the fiduciary debate—namely, does a stricter fiduciary standard increase costs to the point of pricing certain registered reps out of the market.
The answer is no, according to Michael Finke and Thomas Langdon.
Finke, of Texas Tech University and University of Missouri at Columbia, and Langdon, of Roger Williams University, “find that the number of registered representatives doing business within a state as a percentage of total households does not vary significantly among states with stricter fiduciary standards.”
The study was funded in part by the fiduciary educator fi360 and the Committee for the Fiduciary Standard.
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In the the 23-page report, tilted “The Impact of the Broker-Dealer Fiduciary Standard on Financial Advice, the authors ”find no statistical differences between the two groups [states with strict fiduciary standards versus those with lax fiduciary standards] in the percentage of lower-income and high-wealth clients, the ability to provide a broad range of products including those that provide commission compensation, the ability to provide tailored advice and the cost of compliance.”
For the purposes of the study, Finke and Langdon divided states into three categories: 1) those that “unambiguously” apply a fiduciary standard to brokers in that state; 2) those that unambiguously apply no fiduciary standards to brokers; and 3) states where there is evidence of a limited fiduciary standard applied to brokers.
Four states have imposed an unambiguous fiduciary standard on broker-dealers (fiduciary states): California, Missouri, South Dakota and South Carolina.