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August 15, 2012 at 09:55 AM
As you may have noticed, it now seems that the securities industry has successfully shifted the focus of the reregulation debate away from a fiduciary standard for brokers (as mandated by Dodd-Frank) and on to the reregulation of investment advisors (as if they are the greater threat to financial consumers; whipping boy Bernie Madoff not withstanding). To get a handle on what all this means for a universal fiduciary standard for retail advisors, I caught up with Knut Rostad, chief regulatory and compliance officer of Rembert Pendleton Jackson Investment Advisors (in Falls Church, Va.), and founder and president of The Institute for the Fiduciary Standard.
“Things don’t currently look all that great for an authentic fiduciary standard for brokers any time soon,” he told me in an interview. “In fact, it looks like the regulators punt. Yet, I don’t think that’s cause for doom and gloom; it seems to me (and to a lot of other folks) that the future of a broad fiduciary standard depends less and less on what the regulators do, and instead is increasingly a function of the advisory profession itself, and what happens with technology. In fact, given everything we see right now, I am very optimistic.”
Knut’s optimism is based on what he deems a “very myopic view” of the current situation by the financial services industry, one that ignores the macro public sentiment. “Do they realize that no one is listening to them?” he asked. “And if anyone is listening, they don’t believe what they hear. The new normal is not just distrust, it’s disgust. The question is whether this is just a swing of the pendulum or a larger trend that has longer-term consequences.”
For Knut (left), the answer is clearly the latter: a long-term shift in public sentiment, which he (and others) equate to what happened to the views of our parents (or grandparents) who lived through the Great Depression of the 1930s. For you youngsters who need a refresher, the virtual collapse of the U.S. (and world) banking system created widespread distrust in large financial institutions in an entire generation that lasted the rest of their lives: enabling the rise of upstarts like Fidelity Investments, Merrill Lynch, and the rest of the retail mutual fund and brokerage industries.
