A Thousand Points of Fiduciary Light
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The brilliance of Regulation Best Interest (RBI) is how it sidesteps the 1940 Advisers Act to marginalize fiduciary duties for retail investors. It proclaims a broker suitability-styled standard to be in the best interests of investors. Industry advocates say it’s a strong investor protection rule.
It’s not. It’s the opposite.
RBI rejects centuries-old principles guiding the prudent care of someone else’s money. This is implicit in RBI’s numerous unstated assumptions, such as that sales and advice are virtually the same – and in explicitly stated assumptions, such as brokers and investors will be harmed if brokers avoid conflicts. RBI sounds loud Tsunami sirens.
SEC commissioners, scholars, investor advocates, fiduciary advisors and investors have objected. Their opposition is important and necessary, but insufficient.
Why? RBI is a Washington insiders’ story. It’s the opposite of reaching a tipping point. After a decade of “small things,” RBI is now only championed by a small elite cohort – perhaps 100 or fewer policymakers, attorneys, industry executives and lobbyists.
RBI cries out for first responders to reverse course and reclaim a real fiduciary standard. Let’s wage the battle outside Washington and on Main Street and with sports, cultural and business leaders. Right, center or left, it doesn’t matter because outside Washington and Wall Street the fiduciary standard is not some complex formula. It’s common sense.