Wednesday, October 12, 2011

More Fiduciary Discussion

The director of investor protection for the Consumer Federation of America was a strong and unlikely voice of opposition to the Department of Labor's proposed alteration of the fiduciary standard. Her opposition mirrored that of many in Congress and the financial industry. Specifically, she and others feared that the proposal would wipe out the broker-dealer business model for IRAs and leave small savers with few places to turn for retirement products.

She's back this week with a guest blog on where she discusses her support for a fiduciary standard that protects both consumers investments and their choices. The entire piece is worth reading. As the excerpt below illustrates, the piece drills down to a key difference between the DOL proposal and one being talked about at SEC.

Many investors prefer to pay for investment recommendations through commissions on a transaction-by-transaction basis. Others simply can’t afford or don’t have sufficient assets to justify the higher and/or ongoing fees that often accompany comprehensive financial planning or on-going portfolio management. For these investors, the SEC proposal offers the best of both worlds. It preserves the ability of brokers to charge commissions and offer transaction-based recommendations, but it requires them to disclose and – even more important – appropriately manage those conflicts of interest. And it requires them to make recommendations that put the customer’s interests first.