Fiduciary advocates urge SEC not to reinvent wheel

Several organizations backing higher standards for retail investment advice are urging the SEC to require brokers to act in the best interests of clients with some adjustments for their business practices rather than formulate a new approach to fiduciary duty.

The recommendation, which was sent in the form of a letter to the Securities and Exchange Commission, puts those organizations in conflict with the Securities Industry and Financial Markets Association, the trade group for brokers. SIFMA last year called on the SEC to create a new fiduciary standard if the agency exercises its authority under the Dodd-Frank financial reform law to impose a universal standard of care.

“The goal in writing the new rules should be to extend the existing [Investment Advisers Act of 1940] standard to brokers, while clarifying its applicability in the context of broker-dealer conduct, rather than to replace the Advisers Act standard with something new and different,” the letter states.

The letter was signed by the Consumer Federation of America, Fund Democracy Inc., AARP, the Certified Financial Planner Board of Standards Inc., the Financial Planning Association, the Investment Adviser Association and the National Association of Personal Financial Advisors.

Those groups and SIFMA both favor universal fiduciary duty for investment advice. But they diverge on the details.

SIFMA maintains that if the implementation of a fiduciary standard is flawed, only fee-based guidance would be viable, increasing the cost of advice and driving middle-income investors who rely on brokers out of the market.

“We support a uniform fiduciary standard of conduct that increases protection for individual retail investors receiving personalized investment advice, while preserving investor choice,” said Ira Hammerman, SIFMA’s senior managing director and general counsel.

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Related Topics: Certified Financial Planner Board Of Standards Inc. (CFP Board)