July 30, 2010
I feel that while imposition of such regulations could cause undue increased expenses and compliance regulations for many situations, there would me a number of situations that benefit from a fiduciary requirement.
In particular, I feel that whenever any sort of replacement transaction is occurring (liquidations and subsequent repurchases, annuity replacements, life insurance replacement, etc), that setting a fiduciary standard would be in the best interest of the client. This, in practice, is where I have seen the most abuse occur, as the broker/RR is simply having the client make a change that would compensate that individual, and potentially take business away from another individual who had done the right thing for their client. If the replacement is in the best interest of the client, and the new broker/RR plans to service that client going into the future, then they should not be afraid of taking on a fiduciary responsibility.
With regards to new accounts and new moneys, forcing a broker/RR to enter into a fiduciary role would be unnecessary. Many people in this industry are sales people or transaction oriented. They make suitable recommendations for purchase initially, but don't want to constantly monitor that customer's situation in the future. While I personally do not agree with this approach to working with clients, that is just my opinion, and competition is what drives the free markets.
Should a blanket regulation be put into place, that forces everyone to enter in a fiduciary capacity with clients, I feel that this will have an overall negative effect on the middle market, as many of the accounts/transactions will be too small for the broker/RR to justify taking on increased expenses and compliance for. That would lead to more people trying to do investment planning on their own, which would most likely lead to even more inefficient markets, as investors are trading on emotion and not underlying data. Markets that face volatility due to short-term, emotional decisions eventually shake out and stabilize as the financials pave the way.