There's been an ongoing debate on the role of the fiduciary standard in the financial services industry. On the one hand, consumers have a responsibility to research their investing options. On the other hand, that's often why consumers seek investing advice in the first place.
Unfortunately for consumers, sometimes the people who benefit the most from certain investment products are the same ones giving advice. And that leads to a conflict of interests, usually with the individual investor on the losing side.
Registered investment advisers are held to the fiduciary standard, which means they must put their client's interests before their own. Brokers are held to the less stringent suitability standard which requires that clients confirm that their investing goals, income and risk tolerance are suitable for the investments they are buying.
The recently enacted Dodd-Frank Act gave the SEC the authority to enact a universal fiduciary standard across the financial services industry if the agency found cause to do so. The SEC took comments on the issue through August.
According to Alex Leondis, reporting for Bloomberg.com, opposition to the proposed standard was most vehement from dual-registered insurance agents.
In a story titled, "Insurance agents oppose fiduciary standard in comments to SEC," Leondis reports that the insurance industry may be reluctant to disclose conflicts of interest when dealing with clients. Some products sold by the insurance industry, variable annuities, are often criticized for their hidden fees and confusing compensation structure.
Have you ever been taken advantage of by a finance professional and would a universal fiduciary standard be appropriate?
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