Advisory Account

The recent hearings on Capitol Hill involving Goldman Sachs and other financial institutions seems to have breathed life into the broad incorporation of fiduciary status within the investment industry.

A pair of senators recently proposed to restore fiduciary language into the Wall Street Transparency and Accountability Act of 2010.

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 Financial Services Committee recently approved a proposed amendment to the Investor Protection Act.

The amendment has raised concern among many as it would provide the Financial Industry Regulatory Authority (Finra) to broaden its regulatory reach and cover investment advisors who are currently regulated by the SEC.

A primary concern is that Finra's relatively weak fiduciary standards would be applied to investment advisors who, at the moment, are subject to higher levels of fiduciary obligation than brokers.

The Obama Administration is interested in reform that would remove some of the conflicts of interest that exist in the world of financial advice.

Financial planners, however, are concerned that these regulatory proposals which are intended to impose fiduciary obligations on all types of financial advisors may result in overall standards that are less stringent than what currently exists.

Current fiduciary standards apply to an advisory account and largely impact registered investment advisors (RIA).

The Obama administration's proposed financial services regulatory overhaul may have a profound impact on the way that investment advice is disseminated in the United States.

The administration's proposal would impose a fiduciary standard on financial advisors who offer investment advice.

A recent study from Cerulli Associates indicates that registered investment advisors (RIA) are more than hesitant to recommend annuities to their clients.

The report surveys and compares the views of various forms of financial advisors.  Not surprisingly, financial advisors’ product views are tightly related to the financial incentives that support their business models.  Consider, for example, the following: