Welcome to the 'No-Guilt' blog!
People come to here because they want to build financial confidence and take meaningful action. We provide the context for those things that affect your financial health. Our goal is to help you live in the 'No-Guilt Zone'.

The urgent need for a universal fiduciary standard

I closed my last entry with the question: Under which standard would you rather the professional financial advice giver work: suitability or fiduciary?

The answer is obvious, but let me share with you what’s happening behind the scenes.

For decades, the term fiduciary has been foreign to the investing public. Over the last decade and with enactment of Dodd-Frank, it is now entering the public consciousness. (The Dodd-Frank Act is the most extensive financial regulatory laws enacted since The Great Depression. Among other things, the laws aim to prevent another financial crisis and increase consumer protections).

The investing public believes that all professionals who provide financial advice should operate under a fiduciary standard. Still, there is widespread confusion about which financial professionals are currently held to the fiduciary standard. Multiple studies (November 2010, May 2006, February 1995) reveal that most people mistakenly believe their advisors operate under a fiduciary standard even if he or she actually is not.

Proponents of the fiduciary standard of care happily embrace their fiduciary obligation and believe that all recipients of financial advice deserve the protections that have been clearly established since the enactment of the Investment Advisers Act of 1940.

Wall Street opposes the fiduciary standard vehemently. Large financial conglomerates, their trade associations and lobbyists are waging a massive disinformation campaign. They publicly speak of putting the “client’s best interests” ahead of their own, but their own historical evidence strongly suggests otherwise.

Even worse, they misrepresent their true intentions to congress and the public, which is to weaken existing laws and protections. In fact, they are advocating that Congress and/or the SEC (Securities and Exchange Commission) create a new federal fiduciary standard.

Seven professional and consumer advocate associations have joined together to criticize Wall Street’s stand of advocating a new fiduciary standard. In a March 28, 2012, letter to SEC Chairman Mary Schapiro, the group of seven asserts that the goal of writing any new rules should be to extend the existing fiduciary standard to brokers, rather than replacing the current standard with something new, different and less stringent. The group of seven includes:

  • Consumer Federation of America
  • Fund Democracy
  • AARP
  • Certified Financial Planner Board of Standards, Inc.
  • Financial Planning Association
  • Investment Adviser Association
  • National Association of Personal Financial Advisors

The American Institute of CPAs®also advocates extending the current fiduciary standards to broker-dealers.

Given our current political climate, it seems highly unlikely that Congress would ever vote to rein in Wall Street's predatory behaviors. They currently have no incentive to do so, since Wall Street fills much of the reelection coffers.

Many of my peers and prominent thought leaders believe we need a global fiduciary standard that not only applies to the financial industry, but also requires elected officials, regulators and corporations to look out for the best interests of the public at large.

Until that happens, I strongly recommend that to protect your wealth work only with financial advice professionals who fully embrace the fiduciary standard and are willing put it in writing.

It's All about Context... Federal Policy and Busin...
Work with someone who works in your best interest

Related Posts



No comments made yet. Be the first to submit a comment

Find your financial balance.

Our Financial Self-evaluation Tool helps you identify your financial blindspots and increase your financial power.

Download a free financial self-evaluation


Find balance in your Financial Life

Download our Financial Wheel of Life Self-Evaluation