By Mark Barnicutt on January 22, 2011
In a much-anticipated report, the SEC (Securities & Exchange Commission) in the United States late Friday night recommended to Congress that broker-dealers be subject to the same fiduciary standard that applies to investment advisers.
This issue of fiduciary standards has been a major lobbying matter in the United States for the past several years, and something that we’ve commented on previous blog posts of The Wealth Steward. Please click here for such a blog post about recent comments by the SEC Commissioner.
In the United States, currently, broker-dealers must only meet a suitability standard when providing personalized advice about securities to retail investors. But the Securities & Exchange Commission’s report calls on Congress to raise the bar by requiring brokers to act as fiduciaries, and thus put their clients’ best interests ahead of their own.
According to the report, many retail investors do not understand and are often confused by the different roles played by investment advisers and broker-dealers. The study notes that “many investors are also confused by the standards of care that apply to investment advisers and broker-dealers.”
While mandating a universal standard of care, the study recommends that retail investors should “continue to have access to the various fee structures, account options, and types of advice that investment advisers and broker-dealers provide.”
It will be interesting to see how this plays out in Congress as it’s clearly a contentious issue with many US brokerage firms who will be lobbying hard to prevent this change as it would mean a higher set of advice standards and responsibilities than what currently exists today.
As we noted in a recent article, What Is An Investment Fiduciary?, we believe that such a change, if enacted by Congress, would be a positive step forward for both investor clients and the wealth management industry.
With the growing affluence of our Canadian society, combined with the rising complexity of wealth management issues and the trusted role that wealth management advisors perform in clients’ financial lives, we believe that it’s time for Canadian regulators to re-examine the application of fiduciary standards to various wealth management roles as well.
- The 5 Elements That Determine Whether a Financial Advisor Is a True Fiduciary (According to Canadian Courts) - September 18, 2018
- HighView Family Story: Retirement Plans Uncover Unclear Fee Disclosure by Investment Advisor - August 3, 2018
- The Client Dangers of Proprietary Investment Product Overload - March 28, 2018
- 7 Common Hurdles in Creating Sustainable Wealth - February 28, 2018
- Understanding Your Family Office Options - January 23, 2018
- Happy Holidays to Our Valued Clients and Their Families - December 17, 2017
- Why Do I Need an Investment “Fiduciary”? - October 17, 2017
- Dan Hallett of HighView to Be a Panelist in OSC Roundtable on Discontinuing Embedded Commissions - August 24, 2017
- What the 2017 Federal Budget Means for High Net Worth Canadians - March 28, 2017
- What Is Wealth Stewardship? - March 15, 2017