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RIA vs. BD Fiduciary Standard

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Dec 8, 2009 5:09 pm
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An irreverent Wall Street Blog
by Bill Singer Subscribe to RSS Feed: Blog Home | Past Entries 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 investor.  

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 advice."


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