As the Securities and Exchange Commission continues to gather data for a fiduciary rule, Bernie Clark, executive vice president of Schwab Advisor Services, says Schwab’s mission is to ensure that a fiduciary rule is not coupled with harmonization of broker and advisor rules.
“We are trying to delink those concepts”—coupling fiduciary duty and harmonization in one rule, Clark told AdvisorOne during a Wednesday interview in Washington. “The sense we have is that the SEC is linking the two,” and “that’s where the breakdown has occurred.”
Indeed, in releasing the March 1 request for information on the costs and benefits of a uniform fiduciary rule for brokers and advisors, SEC Commissioner Elisse Walter (then chairwoman) said that the comments would also help the agency in its “ongoing consideration of alternative standards of conduct for certain broker-dealers and investment advisers, as well as potential harmonization of other aspects of regulation in this area.”
But harmonization of advisor and broker rules brings with it a “harsh reality,” Clark says: the principals-based RIA model—which currently adheres to about 40 rules—would be forced to comply with the nearly “800 broker-dealer rules.” This, Clark says, would essentially “topple” the RIA model, and drive a lot of the smaller RIAs out of business.
The Securities Industry and Financial Markets Association along with the broker-dealer industry, Clark says, are “very supportive of harmonization because the migration of assets away from those models into the independent space has been great.” If the SEC harmonizes broker and advisor rules “then you are drawing the RIA back into the more traditional model, which doesn’t serve the RIA well or their clients.”