SIFMA: Replace 'fiduciary duty' with 'universal standard of care'

Terms such as “fiduciary duty” and “suitability” contribute to investor confusion, and they should be replaced by a “universal standard of care” for brokers, says SIFMA.
MAR 10, 2009
By  Bloomberg
Terms such as “fiduciary duty” and “suitability” contribute to investor confusion, and they should be replaced by a “universal standard of care” for brokers and investment advisers, Securities Industry and Financial Markets Association president and chief executive Tim Ryan today told the Senate Banking Committee. In prepared testimony for a hearing on enhancing investor protection and regulating securities markets, he noted that a 2007 report written by the Rand Corp. of Santa Monica, Calif., for the Securities and Exchange Commission found that investors were confused by the two different sets of regulatory standards. Investment advisers are held to a fiduciary standard, which requires greater disclosure of possible conflicts of interest, while brokers are required to make product recommendations that are suitable for their clients. “Rather than perpetuating an obsolete regulatory regime, SIFMA [of New York and Washington] recommends the adoption of a universal standard of care that avoids the use of labels that tend to confuse the investing public and expresses, in plain English, the fundamental principles of fair dealing that individual investors can expect from all of their financial services provides,” Mr. Ryan said in his testimony. His statement amounts to a call for abandoning the fiduciary standard, said David Tittsworth, executive director and executive vice president of the Investment Adviser Association of Washington, which represents SEC-registered investment advisory firms. “This is saying eliminate fiduciary duty and let’s have a universal standard of care,” he said. “We think it would be a grave mistake to go to a lower standard of care. Fiduciary duty should be extended to everyone who gives investment advice, not eliminated or watered down,” Mr. Tittsworth said. Investment advisory groups, including the Financial Planning Association, the National Association of Personal Financial Advisors and the Certified Financial Planner Board of Standards Inc. have also called for requiring all financial advisers to come under fiduciary standards.

Latest News

Retirement delays, Social Security fears prompt advisors to rethink income strategies
Retirement delays, Social Security fears prompt advisors to rethink income strategies

Concerns about outliving savings and healthcare costs are reshaping how "Peak 65" Americans and advisors approach income planning.

Barred ex-Merrill Lynch advisor arrested in alleged $2.6M theft of former Miami Dolphin Pro Bowler
Barred ex-Merrill Lynch advisor arrested in alleged $2.6M theft of former Miami Dolphin Pro Bowler

Former advisor Isaiah Williams allegedly used the stolen funds from ex-Dolphins defensive safety Reshad Jones for numerous personal expenses, according to police and court records.

RIA moves: Modern Wealth tops $8.5B AUM as Aspen expands in Connecticut
RIA moves: Modern Wealth tops $8.5B AUM as Aspen expands in Connecticut

Modern Wealth's latest deal for a California-based fee-only RIA marks its fourth acquisition of 2025.

Empower defends private market access in 401(k)s in response to Warren scrutiny
Empower defends private market access in 401(k)s in response to Warren scrutiny

Sen. Warren has warned of private market investment risks due to opacity, illiquidity, and past regulatory issues.

AI is gaining traction with buy-side equity traders and may be an unstoppable force
AI is gaining traction with buy-side equity traders and may be an unstoppable force

Use of the technology is growing and asset managers see transformative benefits.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.