While broker-dealer executives agreed during a panel discussion at the Financial Industry Regulatory Authority's (FINRA) annual meeting in Washington on Monday that the time had come for a single fiduciary standard for brokers and advisors, they argued that the industry should work with regulators to ensure that a hasty decision wasn't made on how to implement such a standard.
With a single fiduciary standard for advisors and brokers, "I'm a bit concerned that we are seeing a big push to sending the market to an advisory based platform, and we may be sorry we didn't create an even-handedness" for clients in using a brokerage model too, said Mark Casady (left), CEO of LPL Financial. "The time for us to define this [fiduciary] difference is here …, but I'm one for gradual change," he said. Casady also said that he supports FINRA becoming the self-regulatory organization (SRO) for advisors.
Indeed, Sallie Krawcheck (right), president of Global Wealth and Investment Management at Bank of America, said that she worried a single fiduciary standard would be "too broad," and that defining who has a fiduciary standard "opens up" the big question "what is personalized advice?" Like Casady, Krawcheck agreed that the industry could successfully achieve a single fiduciary standard "if given time."
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Jim Weddle, managing partner of Edward Jones, noted that while a "unified standard [for brokers and advisors] is where we need to be, a one-size-fits all [standard] is not good for all investors." Weddle went on to say that he hopes "some standardization of disclosure" would be required under a single fiduciary standard so that "we can all speak in one language." The industry—brokers and advisors—"need to work together to create some common language….we have to work with regulators to do this sooner rather than later."
Casady, Krawcheck, Weddle and Mark Cresap, president of Cresap, Inc., all participated on the panel discussion, which was moderated by Richard Ketchum, chairman and CEO of FINRA.
When asked by Ketchum about their concerns regarding the Department of Labor's (DOL) rule regarding advisors' fiduciary role, Casady with LPL said he worries the DOL is "overreaching" into retail brokerage accounts with its proposal to amend the definition of fiduciary under the Employee Retirement Income Security Act (ERISA).
Three years after the market meltdown, all of the panel members noted clients' heightened sense of awareness in risk, and noted the importance of helping clients assess risk in their portfolios, Casady noted that clients of LPL's advisors are focused on "saving more," while Krawcheck agreed that clients' "No. 1 concern" is having enough retirement savings.
Krawcheck urged the industry as well to seek more opportunity abroad. "Our industry is overweight in the United States, and we as an industry need to get rid of that bias and go abroad," she said. "So much of the growth is going to be outside the U.S."
Cresap noted that while "it's good" to invest abroad, "you have to watch the fees."
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Melanie Waddell
Melanie is senior editor and Washington bureau chief of ThinkAdvisor. Her ThinkAdvisor coverage zeros in on how politics, policy, legislation and regulations affect the investment advisory space. Melanie’s coverage has been cited in various lawmakers’ reports, letters and bills, and in the Labor Department’s fiduciary rule in 2024. In 2019, Melanie received an Honorable Mention, Range of Work by a Single Author award from @Folio. Melanie joined Investment Advisor magazine as New York bureau chief in 2000. She has been a columnist since 2002. She started her career in Washington in 1994, covering financial issues at American Banker. Since 1997, Melanie has been covering investment-related issues, holding senior editorial positions at American Banker publications in both Washington and New York. Briefly, she was content chief for Internet Capital Group’s EFinancialWorld in New York and wrote freelance articles for Institutional Investor. Melanie holds a bachelor’s degree in English from Towson University. She interned at The Baltimore Sun and its suburban edition.
