Shocker: Advisers and brokers agree clients should come first

Most advisers and brokers agree that all professionals giving financial advice should be required to put the client's best interests first at all times — the traditional fiduciary standard — according to a new survey. The survey, which was sponsored by the SEI Advisor Network and The Committee for the Fiduciary Standard, found that some 75% of broker respondents agreed that all pros dishing out financial advice should be held to a “client's best interests” standard, while 86% of adviser respondents agreed. The debate within the financial advice industry and in Congress is in the details. Congress is considering whether to subject brokers to the fiduciary standards mandated by the Investment Advisers Act of 1940. Advisers are governed by that standard, while brokers' duty is to ensure that products sold to investors are suitable. While both sides agree that regulations for brokers and advisers to be uniform, many brokers want the new standards to be written in a way to allow them to conduct their traditional business activities, such as principal trades and commission-based sales. “The industry is changing and brokers are leading the way,” wrote Knut Rostad, chairman of The Committee for the Fiduciary Standard, in an e-mail. The Committee for the Fiduciary Standard would like to see fiduciary legal requirements expanded to include all brokers and advisers. Mr. Rostad is regulatory and compliance officer for Rembert Pendleton Jackson, which manages about $500 million. Only 36% of commission-only brokers agreed that a uniform fiduciary standard should not modified to fit brokers selling activities. Fifty-three percent of brokers that are paid by either commissions or fees said that the standard should not be modified, while 91% of fee-based and fee-only advisers said the standard should not be modified. “While majorities of all broker/adviser groups agree they should not be allowed to ask clients to waive the fiduciary standard of care, fewer commission-only brokers agree than do commission/fee brokers,” the survey said. The survey conducted by questionnaire between Oct. 8 and Nov. 6 drew 890 responses from registered investment advisers and registered reps at investment advisory firms, as well as dually registered broker-dealer/adviser firms.