twin business men No more dual registrations. You’re either a broker or you’re an adviser. Not both. Pick one hat and wear it 24/7. (Photo: Shutterstock)

We all knew this would be the endgame. It’s like what happens when your child turns into an adult.

There comes a time when the thing you nurtured, the thing you held so close to your heart, the thing you would have defended to your dying breath, must leave the nest. That time has come for fiduciary.

And so it begins. Just as we expected, a company that initially “embraced” the fiduciary requirement for retirement plans (Merrill Lynch) has decided to “reconsider” that retirement. This may be the wrong decision.

“Time will tell,” Kiplinger editor Rachel Sheedy told me in a recent interview (see “Exclusive Interview: Kiplinger Retirement Report Editor Rachel Sheedy Reveals the One Retirement Question People aren’t Considering But Should,”, June 19, 2018).

This, then, is the moment of truth for all that is “fiduciary.” There are no excuses now. The issue has risen to the forefront of industry attention. It has been promoted to investors not merely through regulators and the mainstream media, but also through the popular culture (q.v. John Oliver’s HBO show). If it has any traction, now is the time we will find out.

The final fight for the fiduciary standard will be settled where many have felt it should have been settled all along: in the marketplace.

As well it should. You see, if we truly believe in free markets, then we ought to let the markets roam free. That means people should be allowed to make their own decisions – good or bad. Granted, we do need regulations when it comes to matters of life and death, but – and let’s be honest here – making a bad purchase can’t always be blamed on the seller. You can go all the way back to Roman times to find the wisdom of “caveat emptor” – “let the buyer beware.”

Don’t get me wrong. I believe anyone offering investment advice should be held to the same standard as trustees and all other fiduciaries.

Aye, there’s the rub.

In fact, while “looking out for the best interest” of clients has been a rallying cry for the fiduciary forces, the regulatory issue was never primarily about that. The main reason we need a uniform fiduciary standard was, is, and remains this: The regulatory playing field needs to be leveled.

Is it fair that regulators require one business model that offers investment advice to follow the fiduciary standard while allowing a different business model to offer investment advice without the same requirement?

This is like the USDA requiring McDonald’s to sell only UDSA-approved hamburgers while allowing IHOP to sell hamburgers that aren’t USDA-approved because, well, selling hamburgers is only “incidental” to a restaurant that focuses on selling pancakes. In truth, the hamburgers sold by McDonald’s and IHOP must meet the same exacting requirements.

So why not the same for investment advice?

Buried deep within the SEC’s Best Interest Rule – almost as an afterthought – is the seed that, if allowed to nurture, will get us past this fiduciary crisis. (By the way, the “Best Interest” part of this rule only makes matters worse.)

Here’s the one thing that matters and the one thing that the SEC can do TODAY that would solve the issue: Prohibit anyone peddling investments from calling themselves an “adviser,” “advisor,” “counselor,” “wealth manager,” or any other title or term that implies they are offering investment advice – incidental or not – without first registering as an investment adviser under the Investment Advisers Act of 1940.

To emphasize this point, and to make it crystal clear to consumers there’s a difference between a broker and an adviser, the SEC must then require firms to make a decision on which side they will reside.

No more dual registrations. You’re either a broker or you’re an adviser. Not both.

Pick one hat and wear it 24/7.