The tool also asks for advisors to find a reasonable basis for their recommendations and to make their rationale available in writing, and to abstain from principal trading unless it’s initiated by a client upon explicit request.
Advisors are ordered to avoid gifts and entertainment unless they are minimal or occasional and to avoid third-party payments, benefits or indirect payments that do not benefit their clients and could be perceived as impairments to objectivity.
Eventually, advisors might be able to use the self-assessments to prove their adherence to the institute’s strict best practices and to demonstrate that they’re acting as fiduciaries to their clients.
“If an advisor has gone through the self-assessment and completed it in a reasonable manner, then it would certainly work as a guide or an aid for investors, assuming advisors made it available to investors,” Rostad says. “That would be one application.”
The institute’s best practices create a professional code of conduct that right now is voluntary, however, and Rostad says a new credential or professional designation surrounding the fiduciary standard might be developed.
The IFS is also considering offering third-party verification for advisors to confirm whether they meet its best practices requirements.
The institute is soliciting comments on the tool over the next 30 days.