Congress Debates ‘Fiduciary Standard’ For Brokers This Week
- Joshua M Brown
- June 16th, 2010
My guess is that they come to an agreement to “study the issue” for a year, but ultimately, the Fiduciary Standard for all financial professionals is going to happen. The big question is exactly what form it will take.
Here’s the New York Times on this week’s congressional discussion:
Will stock and insurance brokers be required to put their clients’ interests before their own?
The answer to that question may be decided on Wednesday, when negotiators from both houses of Congress will convene to discuss the issue, or what’s known as the fiduciary standard.
The provision is buried within the broader legislation to overhaul Wall Street and has been the subject of a contentious debate. On the surface, both the brokerage and the financial planning industries appear to agree that advisers of all stripes should be subject to a consistent fiduciary standard. But behind the scenes, the groups are divided on how exactly it will work, while the insurance industry has been opposed to the standard.
Should this standard become law, one of the first things that will happen is that the blurry line between “broker” and “advisor” will be erased entirely on Wall Street. This is probably a good thing as there is too much confusion amongst the civilians about what these two terms actually mean.
My friend Bill Singer has written about this issue much more eloquently than I can – suffice it to say that he sees a need for a unified term for anyone responsible for other people’s money and a new sense of honor and professionalism for industry participants in general. And he is exactly correct.
The timing and final language of this rule are still up in the air, but I believe that the outcome is certain.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.