So, there's a long way to go before investors can feel that their advisers and managers truly have their best interests at heart.
Putting investors first has been the anthem of CFA charterholders since the first charter was granted in 1963. Charterholders must adhere to a strict code of ethics and standards of professional conduct, which include the obligation to conduct oneself with the duty of loyalty, prudence and care — the underlying principles of fiduciary duty — regardless of whether one works in a fiduciary capacity.
But while charterholders are bound by a fiduciary standard when giving investment advice, the industry as a whole isn't. In our view, it should be. Everyone engaged in providing investment advice — whether for retirement and whether as an investment adviser or financial adviser — should be required to adhere to the same fiduciary standard of care. One profession, one standard.
True professions exist to serve customers and to help them achieve their desired outcomes. We can't claim to be a profession until we're willing to place our clients' interests above our own and avoid conflicts of interest when we can — and carefully manage and disclose the conflicts that we can't avoid. We must publicly distinguish those who embrace fiduciary responsibility from those who merely acknowledge it or want to play word games to justify a middle ground. To that end, those who don't want to play by the fiduciary rules of the Investment Advisers Act should be required to call themselves salespeople. Professions need to have clear boundaries, and a clear distinction in titles is an important step in setting those boundaries.
It's unclear whether the DOL's fiduciary rule will play a role in setting those boundaries given a series of hurdles it must overcome before final adoption. First, the incoming Trump administration has notified executive branch agencies to halt all pending Obama administration regulations to give the Trump appointees time to determine whether to stop the implementation of many of them —including the fiduciary rule. And Congress is likely to take a gimlet-eyed view of the rule. By proposing steps to repeal the DOL's rule in the pending Financial Choice Act, introduced Sept. 9, the House of Representatives has made clear that it doesn't want the DOL to take the lead in addressing fiduciary duties in investment management.
Finally, the court system is reviewing the rule in a number of suits filed nationwide. It wouldn't be surprising if one or more of the three branches should decide against the rule, thus putting formal implementation in jeopardy. At the same time, however, inertia within the industry suggests a de facto, informal adoption of the DOL's rule, as indicated by the number of broker/dealers who have already migrated their customers to fee-based accounts.