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Retirement Planning > Social Security

What’s Best for Clients Is All We Need to Know

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A reader named Chuck Newton left a lengthy comment to my April 14 blog, “This is What the Fiduciary Debate Is Really About,”  at least in part in response to my closing line: “Isn’t it time the SEC got on the bandwagon to give retail clients what they want and need: client-centered advice from advisors who are required by law to put their clients’ interests ahead of their own and their firms’? I’m not sure I understand what they’re debating about.”

Mr. Newton raises some good issues, and seems to capture the sentiments of many advocates of a true fiduciary standard for brokers—but we have to be careful to expect too much, too soon.

“I think your last sentence says it all – you don’t understand what they’re debating.

1) There is no difference between the CFP & the RIA standard.

2) Certain larger firms don’t want the fiduciary standard because they are about the money, not about the client, but it’s more than that.

3) In about 40 of the 50 states, the Insurance Dept. considers it to be the lead in investigating hybrid product complaints. The conflict there is that the advisor is considered by law, to represent the insurance company – implementing the law will create a two tier standard under this system.

4) Investment News, Wall Street Journal and AdvisorOne [ThinkAdvisor] are constantly publishing stories on RIAs who are already under the fiduciary standard — so I guess it really doesn’t work except to mislead the public, similar to other Obama “reforms.”

5) FINRA relies upon bad actors to make money, and raise its fees when fines drop off, thereby slapping more hands rather than revoking licenses because of its inherent conflict of interest.

6) If one loses a license, they keep their insurance license, selling Securities Indexed Annuities as “having the highs of the market without any risk” and Insurance Departments across the nation take no action against these people losing their securities license.

7) Those who are insurance licensed only will not be subject to proposed fiduciary standards, yet still call themselves, financial advisors, financial consultants and financial planners. I hope you now get it — this is a cosmetic approach that does nothing to deal with underlying problems except create more problems than it solves, and create a false sense of security putting consumers at more risk.”

Actually, I’m aware of most of those issues, except point #6 about “de-licensed” brokers simply selling insurance securities, which is interesting, and clearly a problem. I don’t take issue with most of Mr. Newton’s points, except #1: “There is no difference between the CFP & the RIA standard.”

In fact, there is a huge difference between the ’40 Act standard which empowers clients to file lawsuits against RIAs and the courts to award money damages, while the CFP Board’s only recourse is to take away one’s CFP designation.

Yet, it’s Mr. Newton’s concluding sentiment that I find representative of the views held by many fiduciary advocates—and off the mark. It’s unfortunate that even some of the advocates of a broker fiduciary standard sometimes lose sight of the big picture.

I’m well aware that there are myriad complexities surrounding the fiduciary issue and that many of them have been raised by the brokerage industry, mostly to distract the attention of regulators, lawmakers, the public and the press from the real issue.

But I’m talking about the issue that’s reflected in virtually all of Mr. Newton’s points, from the motives of the securities industry, to agents selling securities in insurance wrappers, to creating a “false sense of security” for investors:  Doing what’s in the clients’ best interests. 

The problem is that when fiduciary advocates start debating the “inside baseball” issues, the public’s and the media’s eyes glaze over.

Our message should be that everyone who offers financial advice to retail financial clients—whether it’s about securities, insurance, retirement, taxes or financial planning—should be required by law to act solely in the best interests of their clients, at all times.

As the securities industry appears to have broken down the debate into various jurisdictions—DOL, SEC, state securities and insurance commissions, CFP Board, etc., we need to deliver our message in every one of them. But it should be the same message: Is everything being proposed really in the best interests of the clients? Is disclosure better than avoiding conflicts? Is it better for clients to enable brokers and agents to appear to be fiduciaries when they’re not?

And when they are not acting in the clients’ interests, we need to keep pointing out that they aren’t.

There’s not going to be one big battle to resolve all these issues. But by focusing on what’s best for the clients–for the clients, for the clients–we can win the small battles, one at a time. 


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