When a hard-won historic milestone is achieved, it’s usually front-page news: The repatriation of the Canadian Constitution, Our 2010 Winter Olympics Gold Medal in Hockey. April 6th’s fiduciary ruling by the U.S. Department of Labor (DOL).
About that last one. If you saw the news, you probably found it buried in a newsfeed. With the ruling, at least in principle, anyone offering advice about U.S. retirement assets will be legally required to do so according to the investor’s highest interests, regardless of any conflicting incentives or dual roles they may have.
Here and abroad, this is what’s known as being a fiduciary advisor. In more user-friendly language, the Canadian Securities Administrators (CSA) has been trying to establish similar “best-interest standards.”
In theory, a best-interest standard would mean that all financial advisers would be required to offer only fiduciary advice, instead of the lesser “suitable” advice that is more prevalent today.
In reality, the global fiduciary movement leaves room for improvement. Politics as usual, the U.S. DOL’s fiduciary rule was watered down by several last-minute compromises. Time will tell if it has the enforcement teeth needed to take a bite out of substandard advice.
Closer to home, as reported in this Investment Executive article, the CSA recently re-floated its proposed best-interest standard. I was pleased to see that the Ontario Securities Commission (OSC) is on board with the proposal. Unfortunately, their position is a lonely one. The British Columbia Securities Commission gave it a big thumbs down, and “The remaining CSA member organizations indicate that they share the BCSC’s concerns.”
As a Portfolio Manager registered with the OSC, I have long been a fiduciary. This is not the case for the vast majority of financial advisors operating under various titles and regulated by various agencies. Come what may, Lowrie Financial remains dedicated to advising our clients according to the highest fiduciary standards of care.
With or without regulatory requirements, this is what we do.
Until the rest of the industry has embraced the same best-interest standards (don’t hold your breath), our advice remains: Stop Following Conflicted Advice.