A fiduciary standard in financial services is a controversial and complicated topic, yet one Blaine Aikin is always happy to address.
The Founder and Principal of Fiduciary Insights and the former Executive Chairman of Fi360 spoke on the topic several times at the Broadridge Fi360 Solutions Annual Conference in Austin, Texas, this week.
In a Tuesday morning session with Duane Thompson, Senior Analyst with Broadridge Fi360 Solutions, he explained how the industry is moving from a Best Interest standard (SEC’s Reg BI) to fiduciary (DOL’s Conflict of Interest Rule). What’s the difference between the two, and how is it going so far?
Best Interest was implemented with fiduciary principles attached, he noted, “and there have been reviews by the SEC and FINRA of how well it’s going, and the reviews are mixed.”
“To take a step back on best interest and fiduciary, you don’t even hear about fair dealing anymore,” Aikin explained. “How are we transitioning from fair dealing for arm’s length transactions to Best Interest for recommendations, and then fiduciary for advice. If you look at the pressures on the fair dealing and best interest sides and stopping short of fiduciary, it’s all getting pushed in more compartmentalized ways.”
Layered on top is automation, he added.
“Whenever the SEC looks at digital engagement platforms, and you’re getting predictable results because of your decision architecture, aren’t you, in fact, giving recommendations or advice? It’s pretty hard to say you’re not. If the SEC concludes that you are giving advice, you’re pushing everything in the fiduciary direction.”
While fiduciary advocates are frustrated with the slow pace of regulatory adoption, momentum is with a fiduciary standard overall, and Aikin preferred to focus on how far they’ve come.
“You’ve got fiduciary principles embedded in that Best Interest standard,” he concluded. “I would argue many firms will feel it’s so close to a fiduciary standard that they’ll go with one anyway because it’s where the marketplace basically rewards advisors.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.