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Why Phyllis Borzi is Now Pessimistic On the Plight of a Uniform Fiduciary Standard

Why Phyllis Borzi is Now Pessimistic On the Plight of a Uniform Fiduciary Standard
September 12
00:04 2018

We had a chance to converse with Phyllis Borzi recently to obtain her feelings on the current state of the fiduciary debate. The former Assistant Secretary for Employee Benefits Security of the United States Department of Labor was the official in charge of the Employee Benefits Security Administration had a prominent role in developing the Obama administration’s now vacated DOL Fiduciary Rule. We asked her where she thought the industry and regulators were heading. Here’s what she told us:

“I have been mulling over your questions for a few days as I continue to hear rumors that now Chairman Clayton has his new Republican commissioner in place, he’s ready to move forward with a partisan vote on his flawed proposals without addressing the key investor concerns. This is clearly a missed opportunity to move the ball forward even incrementally.”

“Where I think we’ll be on a fiduciary standard in 5 years is sadly in a worse place than we are today. I hope I am wrong but if the SEC proposals are finalized as proposed without substantial improvement along the lines suggested by the investor advocates, investors will be even more confused about the legal duties of advisors/advisers than ever before.”

“By allowing brokers to continue providing advice under the FINRA suitability standard while claiming they are meeting a best interest standard puts investors in a considerably worse position than they are today.”

“The proposed disclosure standard is weak and confusing and will not be helpful to investors. Unfortunately, the SEC appears ready to finalize a disclosure standard without first testing through focus groups and other common evaluation tools the efficacy of this disclosure.”

“Instead of improving and clarifying the specific disclosures and forcing brokers who decide to be advice-givers rather than salespersons to adhere to the same fiduciary standards to which RIAs would be held, the SEC rules would only compound investor confusion.”

“There is a reason that the financial services industry strongly supports the SEC proposals – the changes the industry would have to make are minimal at best and the more flexibility the SEC gives the regulated community to decide when, how and what information they give investors, the less effective the SEC rules will be. If these proposals really improved investor protections, the industry wouldn’t be pressuring the SEC to move quickly to finalize the rules.”

“In 5 years, I think investors will be considerably worse off if SEC does go forward with its proposals without substantial change. Unfortunately, this will provide an SEC blessing for industry practices that are not only NOT in the best interest of investors but turn a blind eye to the real problem in the financial advice industry: all too frequent use of a compensation structure that rewards and encourages conflicts-of-interest and where investor interests are not aligned with those giving them advice. Real change will require alignment of these interests, not lip service to allowing the use of a best interest standard as a marketing slogan without fiduciary liability.”

Christopher Carosa is a keynote speaker, journalist, and the author of  401(k) Fiduciary SolutionsHey! What’s My Number? How to Improve the Odds You Will Retire in Comfort, From Cradle to Retirement: The Child IRA, and several other books on innovative retirement solutions, practical business tips, and the history of the wonderful Western New York region. Follow him on Twitter, Facebook, and LinkedIn.

Mr. Carosa is available for keynote speaking engagements, especially in venues located in the Northeast, MidAtantic and Midwestern regions of the United States and in the Toronto region of Canada.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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