The strong opposition to adopting the fiduciary standard at the state level is coming only from a certain area of the financial industry, and the opponents’ claims merely “belie the immense benefits a fiduciary standard brings to consumers,” Knut Rostad writes on Advisor Perspectives.
Last week, the Maryland Senate Finance Committee voted to reject the Financial Consumer Protection Act of 2019, which proposed to hold brokers and related individuals to the fiduciary standard, with 10 out of the 11 committee members voting it “unfavorable,” as reported.
Rostad, who attended the March 13 hearing on the bill in Annapolis, Md., writes that he was the only one to speak in favor of the bill, although other advocates sent written testimony. Meanwhile, there were “some 20 ‘suits’" appearing at the hearing “to describe the horrors the fiduciary standard will impose on investors,” he writes. What they presented, however, was “a series of false claims,” according to Rostad.
The assertion that a fiduciary standard would limit smaller investors’ access to financial advice “is laughable,” he writes. Clients have plenty of choices if their broker dismisses them as having too few assets, including “the thousands of RIA firms that have no or very low minimums,” according to Rostad.
“Work your way to the country’s largest RIA, Edelman Financial Engines, which has a $5,000 minimum,” he writes on Advisor Perspectives.
And the claim that a fiduciary standard would lead to fewer choices “is nonsense,” according to Rostad. In fact, the number of lower-cost investment products —and better choices for advice — would increase, he writes. That’s what happened with the Department of Labor’s fiduciary rule, according to Rostad, before it was killed. The Obama-era rule purported to require retirement account advisors to put clients’ interests first but was vacated by an appeals court last year.
Finally, the assertions that state-level fiduciary rules are not necessary — or, as Sifma put it when they lobbied New Jersey to eschew one, are “duplicative, different and/or conflicting conduct standards” — have no merit, Rostad writes.
“After 10 years of a very public debate over fiduciary duties, not a single independent expert (not paid by a brokerage or insurance industry interest) has come forward to support the brokerage and insurance industry’s position and explain why fiduciary scholars, experts and advocates are wrong and the industry’s views are right,” he writes. “Not one.”