Keeping an Eye on Fiduciary Status

The proposed regulation that could expand fiduciary status to a broader set of financial advisors appears to be pending in Congress.

The Dodd version from the Senate Banking Committee would potentially extend fiduciary status to broker-dealers and registered representatives.  Broker-dealers are currently exempt from the Investment Advisers Act which defines fiduciary status.

The House bill does not appear to remove this exemption for broker-dealers.

Let's hope that any final bill reflects the Senate's intent because any elimination or watering-down of the fiduciary requirement would be a big loss for financial services consumers.

There are plenty of examples (encouragement of active trading comes to mind) of financial services product manufacturers and distributors having financial incentives that are directly at odds with consumers' best interests.

Fiduciary status is a very good foundation from which these incentives can be realigned.

This is not to say that a product manufacturer should not be able to capture revenue and profit from sales activity, but rather than the basis for this income generation should not be at direct odds with the best interests of the customer.



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