While I have agreed with my Republican friends many times, they are dead wrong on the subject of the Fiduciary Standard.

For years, there have been two types of financial advisors. One are the Registered Investment Advisors (RIAs). They are held to a fiduciary standard, which requires the advisor to always act in the best interest of the client. That doesn’t mean they can’t make mistakes, as any human being. It does mean they cannot have hidden fees or other conflicts-of-interest, like paid vacations. The other type of financial advisors are stockbrokers, who are held to a “suitability standard”. That means hidden fees and other benefits are permitted as long as the investment is in the same ballpark as the investment the client needs, such as any large-cap stock funds, instead of a particular one.

Democrats have been fighting FOR the Fiduciary Standard for years. When the hidebound SEC could not make a decision, the Department of Labor required it, but only for retirement accounts. It didn’t take long for the President to kill that effort.

The Republicans are now arguing that disclosing the risks of the suitability standard is unnecessary as long as lawyers confuse those risks. As everybody has experienced, lawyers can write disclosures that nobody can understand, not even other lawyers. The Democrats have now introduced a bill requiring the SEC to test the ability of investors to understand such disclosures. At issue is Form CRS or Client Relationship Summary, which theoretically explains the conflicts of interest between advisors and clients. Should it be written so investors can understand it or not? I wish the Democrats good luck on this.

While I have disagreed with my Democratic friends many times, they are dead right on this!