Now that we've called for a fiduciary standard for all investment advice (and we mean a real fiduciary standard), the next question is, "ok, why?" or, "how would it change things?"
In his May Fiduciary Corner column, Blaine takes a look at this question and arrives at six significant changes for the benefit of the investor.
- Greater accountability for adherence to professional principles and reduced reliance on prescriptive rules.
- Consistent emphasis on competent management of portfolios.
- Reduction or elimination of sales-based compensation systems.
- Increased emphasis on investment expertise.
- Investment products will become more competitive on the basis of their merits as investments.
- Currently low public perceptions of financial intermediaries and advisors will climb as a new era of fiduciary responsibility and accountability takes hold and the positive outcomes above become widely recognized.
Of course, these benefits can only be recognized if a true, ERISA-level fiduciary standard is applied for all investment advice. If we see a watered-down version that seeks to meet the suitability standard in the middle, consumers will still be the ones who suffer as conflicts of interest continue to result in substandard products, services and standard of care for investors.
Make sure you read Blaine's full article at InvestmentNews.com and click the "Recommend" button at the top of the page if you like it. And, make sure to leave your thoughts in the comments section below.
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