Advisors, clients benefit from fiduciary standard: FPC

By Staff | July 11, 2013 | Last updated on July 11, 2013
2 min read

American broker-dealers working under a client-first standard experience greater success compared to those operating under a suitability standard, and without a significant increase in costs, according to a study commissioned by the Financial Planning Coalition.

Read: Fiduciary duty will raise costs: CSA roundtable

The study, conducted by the Aité Group, was part of the Coalition’s response, submitted July 5, to an SEC request for information (RFI). The letter and study can be found here. A fact sheet with highlights of the study can be found here.

The study indicates that “applying a uniform fiduciary standard on broker-dealers will have little, if any effect on the availability of advice to customers.”

Survey results showed broker-dealers who are already operating under the fiduciary standard “experience stronger asset growth, stronger revenue growth, and obtain a greater share of client assets than those that provide services primarily under a non-fiduciary model.”

The research also revealed:

  • A majority of brokers and advisors are already operating under a fiduciary standard.
  • Those brokers and advisors agree that the standard should apply when giving advice to retail consumers and that requiring this client-first standard has very little impact in deciding whether to serve “mass market” clients.
  • Conversion of fee-based brokerage accounts to fiduciary accounts shows that a fiduciary standard does not lead to increased costs or decreased services.

“The ‘best interest of the customer’ standard should be the key feature of any uniform fiduciary standard of care,” the Coalition stated in its letter. “However, the RFI does not adequately recognize this central concept.… Indeed the standard contemplated in the RFI is little more than the existing broker-dealer suitability standard supplemented by some conflict of interest disclosures.”

Read: Congress members say fiduciary duty could curb access to advice

The Coalition argues that the current assumptions made by the SEC would “significantly weaken the fiduciary standard for SEC-registered investment advisors while adding few meaningful new protections for retail customers.”

“We vigorously oppose such an approach, because it would have negative consequences for retail customers,” said the Coalition, urging the SEC to promptly propose a uniform fiduciary standard that is consistent with the existing standard required under the Investment Adviser Act of 1940.

Other key points of the Coalition letter include:

  • The RFI’s focus on enhanced disclosure suggests that such disclosure is sufficient for fiduciary standard. While disclosure of conflicts of interests is a beneficial and important step, disclosure alone is not sufficient to discharge an advisor’s fiduciary duty.
  • The Coalition letter identifies specific issues with the RFI’s assumptions and proposes an alternative set of assumptions for a uniform fiduciary standard consistent with Dodd-Frank and the Advisers Act.
  • The alternative standards of conduct and approaches discussed in the RFI are inconsistent with Section 913(g) of the Dodd-Frank Act.
  • The SEC should address harmonization of investment advisor/broker-dealer rules after it adopts a uniform fiduciary standard of care: the two issues are conceptually distinct and should not be linked.

Read: Don’t weaken advisor standards staff


The staff of have been covering news for financial advisors since 1998.