In April, Knut Rostad, President of the Institute for the Fiduciary Standard, plucking the words right from SIFMA’s current position statement on the fiduciary standard, described its objective thusly: to “not subject (brokers) to other fiduciary obligations (the Advisers Act fiduciary standard, other statutory standards.)” SIFMA may be consistent with its message, but the results of a recent survey reveal rank and file advisers don’t agree with the industry’s top lobbying group. In that light, it seems only sporting to offer the beleaguered group these three helpful tips:
1. The days of the broker business model are dwindling. Industry demographics show an alarming trend towards (at least) dual registration or, increasingly more often, the complete forsaking of the brokerage license for the “registered investment adviser” banner. Let’s not be too lofty here. The reason why brokers are evolving (if we dare use that word) into advisers is because the marketplace demands it. Continuing to faithfully wave the pennant of a has-been business model will only lead the organization to the fate of the dodo. Don’t lead the organization to the fate of the dodo.
2. The industry’s true front line players tend to know the most when it comes to the goings-on of the actual marketplace. When they overwhelmingly approve of a fiduciary standard “no less stringent than the one imposed under the 1940 Act,” that should be telling you what their clients are telling them. When they say the fiduciary standard does not impose any additional cost and it doesn’t reduce client choice, that should be telling you their clients are happy. To oppose this reality will only make the clients unhappy. Don’t make the clients unhappy.
3. When it comes right down to it, the debate of the fiduciary standard pits the brave feudal barons of Medieval England, centuries of trust law and thousands of mom-and-pop advisers against much vilified King John (yes, the same bad guy in the Robin Hood story) and Washington politicians (the bad guys in most every other story). The bad guys usually never win. Don’t side with the bad guys.
The days of the suitability standard are quickly drawing to a close. Those that fail to heed to tea leaves will be left behind. The time has now come for SIFMA to gather up its collective guts and make the one decision that will now and forever define it, the one decision that will determine if it will make history or become history. Now is the time for SIFMA to accept the idea of a Fiduciary Standard no less stringent than the one currently imposed on Registered Investment Advisers under the 1940 Investment Advisers Act.