The Institute for the Fiduciary Standard announced this morning it published a new e-book designed to help advisors educate consumers and clients on the benefits of working with a fiduciary.
The new guidance aims to explain how professionals who are registered investment advisors are held to higher legal responsibilities and a higher degree of loyalty and client-first service.
The guidance also promotes the Institute’s Real Fiduciary practices and RIAs that have sworn to uphold the Institute’s code of ethics.
“The guidance seeks to reverse decades-long efforts by regulators to first obfuscate adviser and broker differences, and then to blame investors for being “confused,” Institute President Knut Rostad said in an interview.
“Conventional wisdom says the problem is investors, and finding a fiduciary is complicated and investors should rely on what advisors say. This is backwards. Finding a fiduciary is straight-forward. Investors relying on common sense and what brokers and advisers actually do will succeed,” Rostad said.
According to Rostad, the new e-book also seeks to fill the fiduciary void left by the new Securities and Exchange Commission and pending U.S. Department of Labor standards which Rostad claims still leave investors vulnerable to costly conflicts of interest.
“The new industry standards fail to discuss broker-dealers’ duties to distribute products and their dependence on conflicted product sales,” he said. “Also, brokers’ inability to provide cost estimates up front or actual costs afterwards keeps customers blind about what they pay and brokers’ firms make.”
Instead, the book stresses that investors should only hire those advisors who commit to these “commonsense principles” and are willing to mitigate or fully disclose unavoidable conflicts. The principles are:
• Being loyal. Only accepting compensation from clients.
• Avoiding conflicts – if at all possible -- like a deadly virus.