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Edelman exec signs on with Cary Street as it stretches its 401(k) and corporate reach

Author Dina Hampton April 23, 2018 at 12:50 PM
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R.J. Reibel

Stephen Winks

Stephen Winks

October 7, 2009 — 4:25 PM

Significant progress is being made simply by virtue of the SIFMA agreeing that brokers should be held to a fiduciary standard of care. This was not in the realm of possibility two years ago.

The two previously stated caveates of the SIFMA are (1)that trade execution would continue to be treated as a profit center which is a prohibited transaction under ERISA not in synch with fiduciary duty and (2) the implication that by clients simply having choice removes accountability for investment recommendations which would not trigger fiduciary liability. This would make descretion the trigger for accountability rather the trust vested in the advisor by the client. This later point is a question of the industry’s conventional product management organizational structure geared to sell investment products versus a process management organizational structure geared to addressing and managing investment and administrative value in the best interests of the consumer. This can be resolved by the support infrastructure (processes, technology, functional division of labor, statutory documentation, conflict management and advisory services support) necessary to make fiduciary standing safe and easy to achieve through an audit path and expert opinion letter to prove fiduciary standing. The former point of making trade execution a cost center is readly resolved but requires a different business model and culture. Both are far easier to resolve than the imbeded brokerage culture presently will allow.

The advice business is entirely different from the brokerage business and requires a series of difficult business decisions to be made for the brokerage industry to evolve in support of fiduciary standing. Until these difficult decisions are put on the table and resolved, the brokerage industry will only in principle support fiduciary standing because in fact they will be doing something different.


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