Volcker Rule, Fiduciary Standard Outcomes Critical For Wealth Industry

[Stephen Winks]

MODERNITY WAITS FOR NO ONE: LEADERSHIP VACUUM AWAITSJohn Taft's and Chet Helck's hearts are in the right place in supporting the fiduciary standing of brokers who render advice, which is just about every broker doing a good job for their clients. Yet, the brokerage industry by design has absolved the broker from any responsibility for their recommendations in arbitration proceedings that manage client disputes by maintaining brokers neither render advice nor have any ongoing responsibilities associated with their recommendations. Thus, their good intentions belie the fact that their respective firms are not prepared to assume the fiduciary responsibility and liability associated with thousands of brokers independently rendering advice which is a wise course of action given the responsibility and liability assumed.

In order for Taft and Helck, both good men, to actually support the fiduciary standing of their brokers, they need to find a way to make it safe for their brokers to acknowledge fiduciary standing which is currently a violation of their own internal compliance protocol, and to provide the necessary (a) authenticated prudent processes which simplifies the delivery of expert counsel, (b) advanced technology to support continuous comprehensive counsel required for fiduciary standing, (c) work flow management tied to a functional division of labor (advisor, CAO, CIO functions) so advice is scalable and easy to execute and manage as a high margin business, (d) conflict of interest management so fiduciary standing is possible, and (e) expert advisory services support of the ten major market segments advisors serve.

If every broker in the industry were to immediately declare fiduciary status based on objective, non-negotiable fiduciary criteria of statute, case law and regulatory opinion letters (not including best practices), neither Taft's or Helck's firms would survive litigation as none of the necessary enabling resources are in place that would completely mitigate fiduciary liability. It would be foolish for the industry which disavows that brokers render advice to all of a sudden to assume fiduciary liability with none of the enabling resources inplace to actually support fiduciary standing. Yet, what Chet Helk, a genuine consumer advocate, is suggesting is that brokers today can declare fiduciary status and let the courts define fiduciary duty by litigation. Just by nature of retail product pricing the litigation awards would be enormous.

The industry has created a legal construct where brokers are neither accountable nor responsible for their recommendations by design which simply protects the industry from fiduciary liability by denying that the broker renders advice. This defense is no longer valid by virtue of Dodd-Frank and by SEC ruling which established it is up to the broker's supporting broker/dealer to provide the necessary enabling resources to make fiduciary standing safe, scalable, easy to execute and manage, so each broker and advisor does not have to reinvent the wheel.

Though the broker is certainly doing everything they can to act in the client's best interest within the parameters in which they are allowed to work--the brokerage industry presently does not acknowledge or support the expert fiduciary standing of the broker based on objective, non-negotiable fiduciary criteria of statute, case law and regulatory opinion letters. It is the clear responsibility of each broker/dealer headed by Taft and Helck to provide leadership that would bring fiduciary standing within the reach of every broker and every client.

Helck and Taft may well provide the leadership the industry so desperately needs so the best interest of the investing public can be served. It is certainly in their enlightened best interest to do so, as in a free market the best interests of the consumer always prevails. Modernity waits for no one.

SCW

[the observer]

"brokers neither render advice nor have any ongoing responsibilities associated with their recommendations"

BRAVO Mr. WINKS... you hit the nail on the head... The brokerage industry doesn't just say it, they mean it to be a factual representation of their business model.

Now, read it over and over until it sinks in... and if any broker is giving "personalized investment advice" WITHOUT first being registered as an investment adviser, then throw him/her out of the business.

The stupidity of creating ANOTHER fiduciary offering personalized investment advice, but under a different registration than the 65 is bloody daft and I'm saddened that so many clever people in the world can't see just how plain stupid this crusade is and how ignorant they all look, well either ignorant of the facts, or selfish, self centered and stupid.

Again I call upon the FP coalition to recognize this, stop this silly, childish nonsense and EITHER:

1. recognize that "brokers neither render advice nor have any ongoing responsibilities associated with their recommendations" and do not need to be fiduciaries, OR,

2. Prove that brokers ARE rendering personalized investment advice without being registered as investment advisers and have them sued out of the business, OR

3. declare that one cannot be a broker any more in the 21st. Century because of the complexities of the products and the demands of consumers and, campaign for the elimination of the series 6, 7, 24, 8, & 22, among other registrations, while making all brokers fiduciary investment advisers. Who cares if consumers pay more, who cares if the middle and lower classes are left behind!

Of course when it comes to the coalition, I like option 4 best, Namely:

4. BUTT OUT of the already heavily regulated securities industry, mind your own business, let the SEC and FINRA do their jobs and get on with the business of promoting a profession of "financial planning" for a change, interfering busybodies that you all are! We don't pay licensing fees as CFP® Certificants to have you ponces interfering in already regulated professions, we pay them in the hope you'll finally get your act together, change course and promote the hell out of financial planning, not bloody investment advice!