Close Close

Regulation and Compliance > Federal Regulation > DOL

Fiduciary September 2015: A Historic Time for Fiduciary Advice

Your article was successfully shared with the contacts you provided.

Today marks the beginning of Fiduciary September 2015, the month declared four years ago by the Institute for the Fiduciary Standard as a time to commemorate why fiduciary duties in financial advice matter so much to the markets and investors.  

Fiduciary September 2015 events begin September 10 and run through Sept. 30 (more information can be found on the Institute’s website):     

    • A webinar addressing key fiduciary ‘Best Practices’ is slated for September 10.
    • The Frankel Fiduciary Prize award will be given at a luncheon in Boston Sept 18.
    • A webinar on the key provisions of the DOL BICE requirements is on Sept 23.
    • Knut A. Rostad will speak in New York at a NYSSA symposium Sept 25.
    • The Institute’s final Best Practices will be introduced at a New York media briefing Sept 30.   

This year may well become as historic as was 1940. In 1940 the Advisers Act affirmed that fiduciary advice was crucial to the markets and investors. In 2015 regulatory inaction and industry-regulator skirmishes reveal by contrast a growing acceptance of “business model neutrality” as crucial to the markets and investors.

This transformation is a simple reversal of core priorities.   

In 2015 the cement around SEC inaction on uniform standard rulemaking has hardened. At the same time, SEC administrative decisions defining fiduciary loyalty as disclosure, in handling conflicts of interest, as opposed to avoiding or truly mitigating and assessing harms, have also mounted. The issue today is not whether the client’s best interest is served; the issue is whether a conflict is disclosed. 

In 2015 the DOL’s Conflict of Interest Rule has reached a crescendo, despite overwhelming industry opposition. While posturing is a Washington art form and announcing “acceptable” terms a violation of Negotiations 101, one has to wonder if industry opponents and their incessant repetition of the words “unworkable” and “choice” will be effective in rallying their troops. We’ll also learn if the financial services industry has dodged any fallout from the larger summer of political discontent.        

The Department of Labor’s public hearings in early August spoke volumes about the state of many financial services firms whose opposition to the DOL rule appeared steadfast and unwavering. There was precious little evidence that repeated industry assertions of fidelity to a best interest standard were supported by clear commitments to concrete and verifiable best interest actions.

It wasn’t for a lack of effort by the DOL. Lead DOL administrator Tim Hauser (picture him as a participant in the game Twister) reconfigured language, BICE criteria and (almost) himself in seeking acceptance from firms for an “upfront binding commitment to adhere to that best interest standard.” Still, few takers.

Sure, the industry is correct in that some of DOL’s implementation requirements in the BICE are overreaching and can and should be streamlined and simplified without weakening fiduciary criteria. After all, the BICE principles are hardly unreasonable. In essence they require firms to:

    • Promise in writing to do what’s right.
    • Charge reasonable fees.
    • Follow policies to manage conflicts, give impartial advice and tell the truth.
    • Disclose conflicts and fees the investor pays and the firm receives, and follow state / federal laws.

While uncertainty reigns around SEC and DOL fiduciary rulemaking, there is no uncertainty as to whether advisors can do more to establish, support and communicate to investors in the public square what they should expect from a fiduciary advisor.

CFA Institute lives by this tenet in its Future of Finance campaign. FPA President Ed Gjertsen has called for advisors to “find their voice.” This is the overriding spirit of Fiduciary September 2015. This is how 2015 can become, as was 1940, another historic time to remember.  


© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.