RIA vs. BD Fiduciary Standard

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Dec 8, 2009 12:09 pm
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An irreverent Wall Street Blog
by Bill Singer
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The Fiduciary Standard: Battle Lines Are Drawn
Written: December 8, 2009

As Wall Street reform moves through Congress, the jockeying for
advantage between the investment advisory/financial planning sector and the
rival broker-dealer sector grows even testier.  The lobbying is
intense.  The dollars pour into the pockets of our elected
representatives.  We have already seen far too much nonsense to believe
that the drafting and subsequent voting will be based upon pristine
considerations -- much less the best interests of the public

Among the more critical fights is over the imposition of a
unified Fiduciary Standard on all financial industry representatives.  As I
warned in my Forbes column earlier this year  The
Death of the Salesman:

As a wizened Wall Street veteran, I know that he who
controls the drafting of the rules controls the regulation. A fiduciary
standard for a CFP may be quite different from that of an investment adviser,
and quite different again from that of a stockbroker. Worse, I am already
seeing signs from brokerage industry interests and their cronies that the
battle for defining the Fiduciary Standard may well be riddled with conflicts
of interests and competitive concerns. We may get a Fiduciary Standard that is
so watered down as to not be all that different from the current Suitability
Standard now in effect at broker-dealers.


I urge you to read a comprehensive White Paper authored by Ron
A. Rhoades, JD, CFP, titled: How
the Large Modern Financial Services Firm Can Better Compete as Financial
Advisors and Clients Migrate to a Fiduciary Business Model.   The
White Paper is a seminal document that cogently sets forth the merits of
a strong, unified Fiduciary Standard and includes a number of exhibits that show
the recent history of this reform movement.  Prominent among those exhibits
is the October 16, 2009, letter (to which I was a signatory) sent to the Senate
Banking Committee and the House Financial Services Committee on behalf of a
number of prominent academics and industry members.  That letter's preamble
noted that the signatories "express our deep concern over proposals
advanced by some participants in the securities industry which would create a
far lower standard for firms and individuals who provide investment



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