Industry disagreements regarding an extension of the
traditional fiduciary standard to include broker-dealers should not stop regulators
from “acting decisively” on behalf of investors, writes Kathleen McBride, editor
of a new survey.

At present, RIAs must adhere to a fiduciary standard
under the Investment Advisers Act (1940), while brokers operate under a
“suitability” rule and are regulated by FINRA rather than the Securities and Exchange Commission. 

Dodd-Frank allowed the SEC to
establish a uniform standard for advisors and broker-dealers
providing personalized investment advice to retail customers. However, disagreements have delayed the process and the authority has yet to announce when, or if, it will proceed. 

Supporters of a more robust standard hope the SEC
will act without further delay. Indeed, last August a group of well-known
leaders in the investment world urged Congress, the SEC and the Department of
Labor to “extend and heighten” protection for investors receiving advice.
However, some financial services companies are fighting to prevent proposal of
the rules, which would require brokers to put investors’ interests first.

According to 79 per cent of the 2013 fi360-ThinkAdvisor Fiduciary Survey,
extending the fiduciary standard to include broker-dealers wouldn’t cost
investors more for advice, while 69 per cent believe it wouldn’t price investors out of
the market and 68 per cent say it wouldn't affect access to advice or products.

However, many respondents claimed investors don’t
have the information required to choose of the type of advisor or sales
relationship they would like, and thus argue that clarification regarding the
roles of intermediaries - through titles, firm purpose and disclosure - is
needed.

Meanwhile, an overwhelming 97 per cent believe that
investors don’t understand the differences between brokers and investment advisors,
as 72 per cent said the titles “advisor,” “consultant,” and “planner” imply a
fiduciary relationship exists. Disclosures alone are not sufficient to manage
conflicts of interest, according to 82 per cent.

McBride previously said that this issue is critical not just for wealthy investors but for “investors of all stripes,” and especially for people saving for retirement. In fact, 79 per cent of respondents to fi360 and ThinkAdvisor's latest survey agreed that ERISA (Employee Retirement Income Security Act of 1974) fiduciary duty should cover advice on rollovers out of 401(k)s and IRAs.