High-profile planner Harold Evensky says the Securities and Exchange Commission, as part of its fiduciary rule, should require anyone providing personalized advice to provide a “mom and pop” statement describing the advisor’s responsibilities.
In response to the SEC’s March 1 request for data regarding the costs and benefits of the current standards of conduct for broker-dealers and advisors, Evensky (left) told the agency in his March 8 comment letter—one of four the agency has received thus far—that the “Achilles Heel” of the current regulatory system is “the public’s belief that all professionals providing investment advice place the client’s best interest first, coupled with an inappropriate allocation of responsibility; i.e., ‘where the buck stops.”’
Under the suitability standard that brokers adhere to, “the buck stops with the client. Said differently, the advisor’s duty of loyalty is to the firm, not the client,” Evensky said. “Under a fiduciary standard it stops with the adviser, whose duty of loyalty is to the client.”
Evensky told the agency that while he understands the agency’s “reluctance to impose unnecessary and potentially costly regulatory standards,” he believes that being “focused on protecting existing business models instead of protecting the public, results in a myopic focus that will leave the investing public at a significant disadvantage.”
The criterion for determining when the “Mom and Pop” statement would be required is what Evensky called the “you” standard.
According to Evensky, such a standard would work like this:
If a prospective client calls an advisor and says, “I would like to buy xx shares of YYY.” No problem, the advisor would be subject to a suitability standard.