The significant difference between the fiduciary movement past and present is that it was once a point of positive inspiration, but has now become a source of negativity. There are seven clear signs that the 30-year fiduciary movement is coming to an end. That is not to say that the work of defining new fiduciary standards is going to cease. To the contrary, it is highly likely that even more financial advisers will become subject to fiduciary standards.
1. Fatigue: Financial advisers and their fiduciary clients have grown tired of the subject. Elite advisers no longer consider “fiduciary” to be a meaningful point of differentiation in their businesses.
2. Lack of thought leadership: For the past eight years, no new questions have been asked, nor answered. The movement has been reduced to a single sound bite: “The best interests of the client.” Though true, the mantra fails to capture the breadth, depth and essence of the 30-year fiduciary movement.
(Related read: Fiduciary rule fails by only focusing on fees and expenses)
3. Imitators: A sign that the fiduciary movement is coming to a close is the number of people who now want to join the movement.
4. Regulators: Regulators have clearly signaled that if there is ever going to be a uniform fiduciary standard, it will be defined in terms of de-minimus rules, not in terms of industry best practices.
5. Congress: Lobbyists have found fiduciary to be profitable. Congressional leaders are making public statements that demonstrate a lack of understanding of the history, purpose and salient features of the movement.
6. Courts: Case law is being developed around procedural prudence. This is a good thing, provided decisions are based on prudent practices. The courts may prove to be more effective than the regulators in defining a higher professional standard of care.
(Infographic: What it takes to be a fiduciary)
7. President: A sure sign that the fiduciary movement is coming to a close is that the President has been on day-time TV promoting fiduciary standards. When all three branches of the federal government are engaged, a movement has reached its point of maturation. The only thing remaining is the paperwork.
The fiduciary movement has had a positive, material impact on the management of investment decisions. Whether regulators act or not, the industry today is in a much better position to properly serve clients. It's time to close the curtain on the fiduciary movement and move on to finding the answers to a more impactful question: What will it take to make financial advisory services a true profession?
Don Trone, Mary Lou Wattman and Steve Branham, are the co-founders of 3ethos, whose research and training programs are focused on the intersection between leadership, stewardship and governance.