RIABiz

News, Vision & Voice for the Advisory Community

RIABiz

What financial advisors can expect from Washington this spring: 8 predictions

Financial reform will move forward, but regulation will move backward

Author Ron Rhoades, Guest Columnist April 5, 2010 at 4:09 AM
Admin:
no description available
Ron Rhoades: The more you make brokers and advisers look the same, the more likely it is that FINRA will end up regulating them all.

Stephen Winks

Stephen Winks

April 5, 2010 — 2:04 PM

To restore the trust and confidence of the investing public why not make Ron Rhoades director of consumer protection at FINRA, or the SEC or as head of the proposed Consumer Protection Agency? If consumer protection were the objective, Ron would be perfect.

But is consumer protection really a regulatory focus, as the laws substantiating fiduciary standing are on the books? It is simply a matter of enforcing existing law—as Ron so aptly demonstrates. Any further leglislative actions are very likely to favor the best interests of the brokerage industry rather than that of the consumer.

There has simply been no one to hold the brokerage/insurance industries feet to the fire. FINRA is fully funded by the brokerage industry and its executives will not bite the hand that feeds them. The majority of the five SEC comissioners support the fiduciary standing of brokers, but Congress, the SEC’s boss, has directed the SEC to “study” what is required for brokers to support fiduciary standing, even though the laws have been on the books for more than a century. The massive brokerage/insurance lobby has had its way with Congress in it temporily delaying the SEC from holding brokers being held to a fiduciary standard of care over the next 12 to 18 months. The risk is how much damage can Congress do in the interim.

At the end of the SEC “study”, the brokerage/insurance industries either need to support “the” fiduciary standard of care without denigration, or prepare to be vulnerable to enterprising advisors who offer a faster, better and cheaper value proposition to consumers who prefer their advisors to act in their best interests.

A brokerage/insurance industry sponsored fiduciary light standard imprudently passed by a Congress, which can not find a way to support existing consumer protections, will not restore public trust. As they say, be careful what you pray for as you may get it. Fiduciary light will do more to harm the insurance and brokerage industries in a competitive market place than it will help. It paints the broker and agent in a corner which is counter to the consumer’s best interest.

In a free market, the consumer’s best interests will be inevitably served, one way or the other by enterprising advisors. The brokerage/insurance industries must openly address costs, transparency and accountability issues in portfolio construction for each client necessary to support continuous comprehensice counsel required for fiduciary standing. Disclosure helps but is no substitute for fiduciary standing.

SCW


Related Moves

Charles 'Chuck Schwab' called James Gorman to protest a two-broker poach, kicking off a hydra-headed legal battle, costing Morgan Stanley millions, so far

The Schwab founder and chairman invoked Charles Schwab Corp.'s zero-tolerance policy against Wall Street -- or RIA -- poaching of talent and AUM from Schwab branches.

March 9, 2023 at 1:23 AM

Why FINRA's late appearance into smoothie-throwing broker James Iannazzo's life might be rough

It's been about 11 months since Merrill Lynch fired him, and the CFP Board stripped him of the CFP mark; attracting the SRO's attention means more woes.

December 29, 2022 at 1:05 AM

November 18, 2022 at 2:56 AM


RIABiz Directory

The Industry Sourcebook for RIAs

   |    LISTING


RIABiz Directory sponsored by:

Directory Sponsor Logo