Fiduciary Advice in the Age of “No Guardrails”

Knut A. RostadAdvisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

Fiduciary September just concluded. To generate further awareness, my organization, the Institute for the Fiduciary Standard, produced eight panels with 22 speakers on topics that included the proposed DOL fiduciary rule and the birth of fee-only planning in NAPFA’s early years.

Fiduciary advice is based on law and is an expression of the acceptable norms in our society. But a recent Wall Street Journal piece by Matthew Hennessey discussed decades of diminishing societal norms to explain today’s absence of restraints and excess of uncivil conduct and speech.

Hennesey noted that the erosion of norms “goes far beyond politics.” “Social media is filled with videos of breakdowns, beatdowns and freakouts …. only in a society without guardrails does it feel right to film a crime in progress for public titillation” rather than aiding the person in need.

The erosion of norms is also about doing things we know to be wrong or making false or obfuscating statements. On the political level, it’s now widely accepted that the question of impeachment and even stating simple truths is no longer a matter of policy or political differences. They are now sharp partisan issues that reflect major differences in, for example, what constitutes an impeachable offense. The result is that each side has its own “facts.”

In financial advice, “no guardrails” translates to obfuscating what fiduciary means, ignoring legal precedents, conflating sales transactions with trusted fiduciary advice, and redefining what is a conflict of interest.