Fiduciary rule amendment could change the investment industry
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If they pass, amendments to a proposed federal rule on investment advice could transform the investment industry.
The rule, proposed by the
The agreement would make those advisers fiduciaries - investment advisers legally required to work in the best interests of their clients. Currently, only registered investment advisers (RIA) are considered fiduciaries.
The new rule would apply to all financial advisers - brokers, registered investment advisers, insurance agents and other types of advisers - and has the backing of President
"It's a very simple principle: You want to give financial advice, you've got to put your client's interests first," Obama said in a speech before the
Those in favor of the rule - generally investment advisers who already are considered fiduciaries - say it would create a level playing field that would help potential clients know exactly who and what they are dealing with. Too often, according to
"When you're told to go to a (certified public accountant), you basically know what kind of educational background and certification requirements that person has," he said. "It's the same thing when you go to a lawyer. With investment advisers, you don't always know."
But groups such as the
According to a survey it conducted this year of insurance and financial advisers, about twothirds of respondents said if enacted, the rule would cause them to lose clients who would be "intimidated" by having to sign a contract and because the "burdensome data retention and disclosure requirements" would force advisers to cut off small and medium accounts.
"Increased paperwork and electronic disclosures equal increased costs, and this would be particularly burdensome for smaller firms with limited resources," NAIFA President
U.S. Secretary of Labor
Perez told the House the amended rule does not ban commissions, does not include appraisals or valuations of stock held by employee stock ownership plans, and does not apply to brokers who take direct orders from clients and provide no advice.
"Individual retirement accounts had just been created, and employer-based 401(k)s did not even exist," he said. "Today, America's workers have more than
"Today, America's workers have more than
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