Efforts to sync a standard between stockbrokers or insurance agents and advisors would fall short.
Registered representatives--stockbrokers--legally are agents of broker/dealers. In the insurance field, sales representatives--insurance agents--legally are agents of insurance companies.
Under principal/agency law, agents owe the fiduciary duty of loyalty to their principals. Satisfaction of this duty must come first and foremost before any duties that stockbrokers or insurance agents may owe to their clients. In effect, this means that stockbrokers and insurance agents are required by law to maximize the revenue of their principals--whether or not doing so comes at the expense of clients.
This legal requirement that the interests of one's principal must come before those of one's clients clashes directly with the legal requirement that the interests of one's clients must come before those of fiduciaries such as registered investment advisors subject to the Investment Advisers Act of 1940. This has always been ground zero--the precise point where the rubber meets the road--in the fiduciary wars of the last decade.
Any efforts to "harmonize" the fiduciary standard of conduct between those who must legally place the interests of their principals above those of their clients--stockbrokers and insurance agents--and those who are legally required to place the interests of their clients before their own--fiduciary registered investment advisors--are therefore doomed from the start. That's why all such efforts to date have failed as the revolving chairs at the U.S. Securities and Exchange Commission continue to "study" this "important issue."
Should some sort of a "harmonized" fiduciary standard of conduct ever be adopted--which likely would be spearheaded by the SEC--then, by definition, that standard would necessarily fall short of the basic duty required of a fiduciary found in the common law of trusts: placing their clients' interests ahead of their own. You just cannot fit a square peg in a round hole.
I'd like to share a few thoughts on topics that may not be deserving of coverage on their own, but still deserve to be addressed.
The DOL Rule in 31 Words
I have rarely cited other articles in my column. But one by Bob Veres, "My Journey Toward a Better, Simpler Fiduciary Rule," caught my eye. Veres is a 30-year observer of and participant in the financial planning and investment advisory fields.