by bobby l hickman
Is Your Advisor
A FIDUCIARY?
New rules maintain dual standards for responsibilities
C
onsumers often assume that their financial advisors are putting the customer’s interests ahead of their own, but that is not necessarily the case. Although two federal regulators have now harmonized their rules for financial advice, two different standards remain in the marketplace that are likely to continue causing confusion for consumers. For decades, Registered Investment Advisors (RIAs) have been classified as fiduciaries, requiring them to act in the best interests of their clients – regardless of their own interests or those of 6 / ADVISORS MAGAZINE
JAN 2021
their firms. Meanwhile, brokerdealers were held to what the SEC termed a “quasi-fiduciary” standard to make suitable recommendations to clients. An attempt by the U.S. Department of Labor to hold brokers to the same fiduciary standards as RIAs was struck down in 2018 by a federal appeals court. Earlier this year, the SEC addressed the issue with Regulation Best Interest, which requires brokers to act in the “best interest” of their clients. After the SEC regulation survived a federal
court challenged in June 2020, the Labor Department adopted an identical rule that aligns its regulations with the SEC. The Office of Management and Budget provided final approval for the Labor rule in November. The new rules do not hold brokers to the fiduciary standard, but they do provide a higher standard than the previous “suitability” standard. However, none of these new rules alter the fiduciary standard for investment advisors. With each type of financial professional held to a different
