(Updated) Groundbreaking SEC study would smash old regulatory system, creating fiduciary brokers and more regulated advisors
Controversy and conflict emerge as SIFMA, Schwab and others begin to react
Jeff Spears
Sure looks like the SEC got it right! While most of the pre-release coverage had focussed on the flaws in the B/D model the study recognizes that there are items that need to be improved in the RIA business model too.
I’ve worked in both business models and couldn’t agree more with the SEC study.
Bravo
Stephen Winks
Commissioners Casey and Paredes call for yet another study illustrates they have not been paying attention to the substance of the fiduciary debate. It has been long established and agreed by both advisor and brokerage interests that brokers are neither accountable nor have ongoing responsibilities for their recommendations. Thus by definition, brokers don’t know whether they add value or not by design, inorder to mitigate fiduciary liability. Broker/Dealers neither acknowledge nor support the fiduciary standing of their brokers. Thery do not even acknowledge their brokers render client specific advice which is a fiduciary act. None of the necessary enabling resources (prudent process, advanced technology, work flow management, more sophisticated approach to portfolio construction, conflict of interest management) are in place for it to even be possible for brokers to know whether they add vaslue or not.
What Casey and Paredes don’t understand is the level of counsel a broker can provide has been crippled by the insistence of brokerage interests who would like to perpetuate the industry stasis of 1940 before ERISA, Modern Portfolio Theory, the Internet and advances in investment analytics and portfolio construction were advanced. Today, modernity requires an unprecedented level of counsel which is easily is possible but thwarted by brokerage interests..The brokerage industry must evolve from selling investment products with no accountability or responsibility, to expertly addressing and managing investment and administrative values for each client as required by fiduciary standing and statute.
SCW.
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