Fiduciary Responsibility: Not a Pick-and-Choose Proposition

By Jeff Briskin, President, Briskin Consulting on Tuesday, March 22nd, 2011

ByAllAccounts’ new study, Advisor Perceptions of Fiduciary Responsibility, offers a fascinating snapshot of how RIAs and brokers are demonstrating their commitment to serving in their clients’ best interests, while also illustrating, however, that many apply their own litmus test to determine where this responsibility begins and ends.

First, the good news. It’s encouraging to see that nearly 90% of respondents believe they're acting in a fiduciary capacity for their clients, and 75% of all respondents support a common fiduciary standard for both brokers and RIAs.

It’s also good to see that most advisors consider viewing all of their clients’ assets, collaborating with their lawyers and accountants, and acting as their trusted retirement advisor as responsible strategies for acting in their clients’ best interests.

However, what’s troubling is that many of these same advisors apparently don’t believe that the same standard of fiduciary oversight applies to the advice they give to their clients about their investments. Of those surveyed, only:

  • 50% said that creating an investment policy statement before giving investment advice is indicative of putting clients’ best interest first. 

  • 53% said that advising on retirement accounts is important to putting clients’ best interests first.

  • 55% believe evaluating and recommending mutual funds is important to putting clients’ best interests first.

  • 47% felt advising on stocks and bonds is important to putting clients’ best interests first.

I find these results odd, seeing as how both federal and state laws clearly state that a fiduciary advisor must apply the same level of objectivity, accountability, risk management and cost-efficiency in evaluating, recommending and managing investments, as they do the planning processes that determine their clients’ asset allocation and portfolio construction parameters.

Any advisor who believes that they can pick and choose their own fiduciary responsibilities can’t honestly claim to be acting solely in their clients’ best interests.  It is for this reason that the SEC is proposing to create a uniform fiduciary standard that applies to both brokers and RIAs.  Given that 40% of survey respondents are somewhat familiar or only “a little familiar” of this initiative, its enactment cannot come soon enough.

Jeff Briskin is President of Briskin Consulting, which provides marketing, client research and fiduciary education and training to financial services companies and advisors. Visit www.jeffbriskin.net for more information. 

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