In last week’s blog (July 10 on ThinkAdvisor, The Cost of Fiduciary), I applauded NAIFA’s objections to a fiduciary standard for brokers, as voiced in its comment letter to the SEC, for its sheer entertainment value alone (NAIFA CEO Susan Waters responded to my blog with one of her own).
The highlight of the NAIFA letter was the oldie but goodie that putting the interests of their clients first would be bad for business (I paraphrase). I also mentioned that there were many thoughtful letters in support of such a standard, chock full of investor-centric reasoning and supporting data. Perhaps the best of them (which is saying something), and maybe the best position paper I’ve read on the subject, was submitted by the Financial Planning Coalition (the FPA, NAPFA, and the CFP Board): It’s a virtual delete button for arguments against the standard, and a reboot for the SEC’s attempts to water down an eventual standard through the assumptions in its “request for information.”
The Coalition’s letter is a remarkable work (see the ThinkAdvisor news article by Melanie Waddell on the letter, along with separate submissions by SIFMA and Schwab, both of whom conducted surveys on the fiduciary standard). The Coalition’s comment declares uncompromising support for a true fiduciary standard “that would apply to both broker-dealers and investment advisers, when providing personalized investment advice to retail customers… … no less stringent than the existing fiduciary duty standard under the Investment Advisers Act of 1940.” And at the same time, the letter takes the SEC to task for trying to skew the outcome: “The Coalition is concerned that the assumptions presented in the RFI are not consistent with this standard.” To wit: “The [The SEC’s] Request For Information makes flawed assumptions about a fiduciary standard,” and “the alternatives discussed in the RFI are not consistent with Section 913(g) [of the Dodd-Frank Act].”
But the real power of the Coalition’s response is the data it includes to debunk the securities industry’s current main objection to a fiduciary standard: That a fiduciary standard would cost too much. This data comes from a study of brokers and RIAs that the Boston-based Aite Group conducted this spring for the CFP Board, showing that rather than driving up costs and hurting business, adopting a fiduciary standard actually improves a broker’s business.