Insights from the experts in investment fiduciary responsibility.

Fiduciary momentum from the industry, FINRA outstrip SEC's pace

Posted by Bennett Aikin on January 07, 2015

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Irrespective of whether a firm must meet a suitability or fiduciary standard, FINRA believes that firms best serve their customers—and reduce their regulatory risk—by putting customers’ interests first. This requires the firm to align its interests with those of its customers.

This statement was part of FINRA’s annual Regulatory and Examination Priorities letter that came out yesterday. It’s a notable position to take for the self-regulator that is thus far under no obligation to expect anything more of its members than the traditional suitability standard. But if you’ve been paying close attention, it’s just one more signal of the industry-wide trend towards placing the best interests of investors ahead of all other interests.

In his most recent Fiduciary Corner column for InvestmentNews, fi360 CEO Blaine Aikin looks at some of these trends that are working in investors’ favor, even as the wait for SEC action on a fiduciary rule drags on through its fifth year.

Fiduciary Momentum

Blaine’s article highlights three trends that are shaping the fiduciary environment going forward:

  1. The convergence of the standards of care for brokers and advisers – FINRA is certainly not waiting on the SEC. The Priorities letter is just their latest step in acknowledging that the lines between brokers and advisers in investors’ minds is blurring.
  2. The impact of technology – Both the SEC and FINRA are utilizing technology and big data to make enforcement more efficient and effective. At the adviser level, the rise of robo-advisers further muddles the way investors views and interacts with the financial services industry.  
  3. The market is favoring fiduciary – The number of advisers is decreasing, transparency is increasing across the board, and investors are reacting by naturally selecting advisers who possess special skills and professional credibility.

Make sure you go to InvestmentNews to read the full column.

What’s it mean for advisers?

The key takeaway from both the FINRA letter and Blaine’s column is that the most successful advisors will be the ones who take care of their clients first. Advisors who do an exceptional job of helping their clients manage their assets will achieve maximum sustainable business success. The best way to do that is to adopt investment processes and principles that focus on achieving clients’ financial goals in the most efficient and effective way possible. 

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