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Posts Tagged ‘CEFEX’

How to Draw the Bright Line Between RIA Fiduciaries and Product Pushing, Conflicted Competitors

By Kathleen M. McBride, AIFA®

As hundreds of RIAs gather in Boston for Schwab’s IMPACT 2015, the news that some Congressional Democrats are joining Republicans in an effort to head off the administration’s fiduciary rule on retirement accounts underscores a political reality: broker-dealers, banks, insurance companies and mutual fund companies still wield enormous influence in Washington.

The brokers, banks, insurers and mutual fund companies will spare no expense to win regulatory cover allowing them to assert claims – however unfounded – that they, too, act in their customers’ best interest.  They will continue to spend millions to destroy or dilute the impact of the DOL fiduciary rules and head off or cripple similar regulatory initiatives at the federal and state level.  This fight will likely continue into the next Congress and administration, as well as in the courts.

As a result, efforts to strengthen fiduciary obligations of brokers and insurance reps will make progress but the regulatory outcome will fall far short of perfection.  The distinction between the fiduciary standard and suitability will get even fuzzier.  Dual registration will continue to confuse and confound clients.

What does this mean for RIAs?

First, RIAs cannot count on the regulators to draw a bright line between RIAs’ client-focused business model and that of their product-pushing, conflicted competitors. More than ever, RIAs will have to lean into differentiating and validating their firms’ commitment to fiduciary excellence.

Second, some forward-thinking competitors – among brokers, banks, insurance companies and mutual fund companies, are already working to build a more fiduciary culture and appropriate product offerings and compensation models.  Instead of a race to the lower standard, we may have an outbreak of higher standards among some key competitors.

The good news is that the national debate on this issue has shined a light on the value of working with a true fiduciary.  We know the fiduciary model works – for both clients and firms.  There’s already evidence that prospective clients are asking about firms’ standing as fiduciaries.

In this environment, RIAs have an opportunity to distinguish themselves and build their practices.  If you’d like to talk about how to achieve that goal, please come by Booth 144 at IMPACT, where I can be found with my colleagues from the Centre for Fiduciary Excellence – CEFEX – and fi360.

Kate McBride, AIFA®, founder of FiduciaryPath, LLC is an Accredited Investment Fiduciary Analyst®; a CEFEX analyst with the Centre for Fiduciary Excellence, auditing fiduciary firms’ investment fiduciary practices for certification; and a consultant on fiduciary matters. Ms. McBride serves as chair of The Committee for the Fiduciary Standardkmcbride@fiduciarypath.com.