RE: Investor advocates call for fiduciary duty, by Stan Buell, president, Small Investor Protection Association, investmentexecutive.com, June 3, 2015
As a point of clarification, Advocis members who practice in both the insurance and securities sectors are already subject to a common law fiduciary duty. This means that when the facts warrant it a fiduciary standard is imposed.But consider the situation where a financial advisor is meeting with a client to plan their financial future and that client insists that a certain investment be made with respect to one transaction, but wants the expertise of the financial advisor for another aspect of their investment decision.In the first instance, it would make no sense for a fiduciary duty to exist, whereas, in the second instance it may be appropriate for a fiduciary duty to exist.The current common law standard can accommodate both these common situations in a fair manner. On the other hand, a more rigid statutory fiduciary standard is not flexible enough to maintain the nuanced approach that already exists.So why are we trying to fix something that’s not broken?
Advocis recognizes that gaps in the current regulatory framework still leave consumers exposed. Therefore, in addition to the existing fiduciary standard, we propose raising professional standards for all financial advisors including financial planners. These key elements are outlined in our 2013 consultation document, Raising the Professional Bar. Like the Small Investor Protection Association, Advocis is calling for increased consumer protection.
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