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Stewardship Standards

Vincent explores the debate of Industry Standards, Duties, Best Practices and Regulatory Trends

The views and opinions expressed in this blog are those of Vincent Micciche and do not necessarily reflect those of LifeMark Securities









A Strong Start in 2018 for the Fiduciary Movement

Vincent Micciche CRCP GFS

SEC Chairman Clayton recently surprised the financial services industry by boldly announcing that the Commission plans on introducing a Uniform Fiduciary Rule by mid-year. Supporters and opponents alike were surprised by the timetable and agree it’s very ambitious and likely to spur a new round of legal challenges.


Whether that happens or not, it confirms my belief and forecast of the last 2 years. Specifically, the DOL Fiduciary Rule is fatally flawed, it will die a quiet death and be replaced by a Uniform Fiduciary Rule likely to be promulgated by the SEC. With that said, it is also possible that the DOL and SEC will collaborate in drafting a new rule.

Many firms within the industry have accepted, as inevitable, the fact that a fiduciary standard is imminent and have begun the process of conforming their business model to a fiduciary standard. Some firms, like many wire houses, have engaged a push to move clients from commission brokerage to fee based accounts. One such firm is Morgan Stanley who, as a result of this strategy, enjoyed an increase in gross revenues and profit margin in 2017 that exceeded even the most optimistic estimates. 

Others are considering disclosure based strategies to address inherent conflicts of interest. A few firms like mine, have adopted fiduciary protocols in client engagement and adviser training. LifeMark Securities actually deployed a Best Interest Contract (BIC) as originally called for in the DOL Rule despite the fact this requirement has been suspended several times.  And lastly, there are still a good number of firms that are taking a “wait and see” position and continuing to conduct their business status quo.

I fully expect the standards debate to intensify in the new year and I look forward to engaging my colleagues in the industry in this important discussion. Although it’s impossible to predict exactly how this ends, it is safe to assume that the regulatory reform in play will dramatically impact all the actors in the industry. 

Heretofore, only Registered Investment Advisors (RIA’s) and their associates have been held to a strict fiduciary standard and are comfortable in believing they will be unaffected by the regulatory movement toward new standards. On the other hand, insurance agents, commission based securities salesman and financial planners are quite uncomfortable with the prospect of facing significantly more onerous and expensive requirements to render financial advice. Even more troubling to this group is the fact that some of the conflicts of interest inherent to their present business model may not be curable at any cost.

To be sure, it will be an exciting year in the financial services industry. The one clear winner in all of this is the public investor. As a result of the ill-fated DOL Rule, overall fees are trending down while transparency is increasing. I know that many of my colleagues in the industry disagree, but I firmly believe that investors small and large will ultimately benefit by the adoption of a uniform fiduciary standard.

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