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December 06, 2013 at 09:08 AM
“Simply put, a fiduciary does the right thing. Sounds straightforward, right? As straightforward, perhaps, as investing in low-cost index funds. Shouldn’t everybody be doing it?”
Thus did Michael Zeuner, a founder and board member of The Institute for the Fiduciary Standard, begin the festivities at a Thursday luncheon in New York honoring John Bogle on the occasion of his new book, The Man in the Arena (Wiley), and for his career-long advocacy not just of index investing but of putting the investor first.
(Bogle’s book was edited by Knut Rostad, the institute’s president and a ThinkAdvisor contributor.)
Zeuner, managing partner of WE Family Offices, then listed the specific legal definitions of the fiduciary standard before summing up the standard as “doing the right thing,” admitting that nevertheless the concept is “anathema” in the financial services industry.
“It’s far more profitable and lucrative to sell things and exploit the knowledge gap,” he said, between individual investors and “those who are paid to create and/or sell investment products.”
Many of the forecasts about the SEC’s intention to mandate one fiduciary standard for all financial advice-givers have been negative lately for advocates like the institute. The SEC this week placed a fiduciary rulemaking on its schedule for 2014, though it said in a filing that the timing of its “next action” on the fiduciary rule was “undetermined.” Melanie Waddell of ThinkAdvisor wrote in her December column in Investment Advisor that there was a possibility of the SEC instituting two fiduciary standards.
But fiduciary proponents, suggested Jim Patrick of Envestnet, remain optimistic.
Patrick, also a founder of the institute, said “we’re optimists; we’re hopeful” still about prospects for one fiduciary standard, and listed the different ways the institute was “mobilizing” to have such a standard implemented. Those ways include advocating with regulators and legislators in Washington, sponsoring third-party research on relevant issues, awarding the annual (Tamar) Frankel Fiduciary prize (which will be presented to Robert Monks on Dec. 10 in Washington) and sponsoring events like last year’s John Bogle Legacy Forum in New York.
A key step in that mobilization was enticing 12 well-known leaders in the financial services community to sign The Fiduciary Declaration and presenting it to then-SEC Chairwoman Mary Schapiro. Two signers of that declaration were at Thursday’s event: Bogle himself and Alan Blinder, the Princeton economist who served on Bill Clinton’s Council of Economic Advisers and as vice chairman of the Federal Reserve Board of Governors.
