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America having its own debate about financial advice

Staff reporter |  26 March 2015  |  Super

debate is not just Australian financial advisers who are coming under intense scrutiny. A debate is raging in the United States as well. In the US, pension funds are called 401(k) funds. The Securities and Exchange Commission (SEC) and the Department of Labor (DOL) have been drawn into a debate about whether brokers should act in the interest of the clients.

This is the same kind of debate underpinning the furore over the Future of Financial Advice (FOFA) reforms in Australia. Are financial advisers or brokers sales people, or people providing a service to clients who are answerable for the quality of that service?

Here is one article:

Later this spring, the DOL is expected to release for comment a rule that would require brokers to act in the best interest of their clients, or meet a fiduciary duty, when handling 401(k)s and individual retirement accounts. Last week, Ms. White told an audience at a Securities Industry and Financial Markets Association meeting she would like the SEC to proceed with its own fiduciary-duty rule for retail investment advice.


Opponents of the DOL rule want the agency to halt its rulemaking process until the SEC acts. Ms. White said the timing of one measure will not affect the other. She also said her backing of fiduciary duty was not related to the DOL activity.

“We are separate agencies, and we need to proceed separately when we think that the time is right and we have something that we think should advance,” Ms. White said.

The DOL rule is being reviewed at the Office of Management and Budget after getting the strong backing of the White House. If the OMB signs off, as expected, the DOL will put the rule out for public comment and work toward finalization.

The Dodd-Frank financial reform law gave the SEC the authority to promulgate its own fiduciary-duty rule. The agency has not acted in nearly five years.

Several lawmakers pressed Ms. White on whether a fiduciary-duty standard for retail investment advice would raise regulatory costs for brokers and force them to abandon investors with modest assets.

Rep. Steve Stivers, R-Ohio, asserted that a fiduciary-duty rule would “leave the little guy out.”

Ms. White said raising requirements for brokers to a best-interest standard, which investment advisers already meet, is good for small investors.

“It's to the benefit of retail investors,” Ms. White said. “That's who we're acting for.”



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