Are you as tired as I am of hearing the repeated lobbyist mantra that there’s no difference between the fiduciary standard and the suitability standard? At issue is the blatant attempt to reframe the argument from a legal client-centric matter to a mere marketing war between two competing — and, it is implied, equal — business models. The already jaded consumer can only conclude the whole thing is nothing more than Madison Avenue sloganeering and gimmickry. 

Taste great? Less filling? What does it matter? 

And with that, the lobbyists win. 

Now, here’s the real challenge for fiduciary aficionados: The big firms backing the lobbyists have all the money. So if the war is going to be waged in Washington or on the air waves, guess who wins? Like the Redcoats in the American Revolution, these folks are wealthy, well-armed and well organized. But that doesn’t mean a small, independent band of rebels can’t win in the end. All it requires is taking the battle to a new arena, an arena where ideas trump money, facts beat advertising and logic overwhelms organization. And all this happens while the independent media reports it with fervor. 

As if to emphasize this effort, the Institute for the Fiduciary Standard (IFS) has established the Frankel Fiduciary Prize. Name in honor of long-time fiduciary advocate Tamar Frankel, the IFS desires to recognize and promote those “individuals who advance fiduciary principles.”

These are the individuals who have shown, among other things:

  • Nonfiduciary self-dealing transactions (the kind a true fiduciary is prohibited from making) actually cost investors billions of dollars;
  • Fiduciaries are more likely to protect clients from themselves; and
  • Eight centuries of successful trust law can never be erased by a slick slogan.  

Actions like these can contribute to the constant drip-drip-drip that will ultimately lead to the undoing of the nonfiduciary advisor as an acceptable business model. Brokers can, and should, be allowed to continue to sell securities and investment products, but, in doing so, they must never cross the line into offering advice. That’s the job for a fiduciary.

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