(The opinions expressed here are those of the author, a columnist for Reuters.)
By Hilary Johnson
Feb 20 (Reuters) - Financial advisers looking to show they have their clients’ best interests at heart are paying to certify that they adhere to a “fiduciary” standard that regulators have been debating for years.
The U.S. Securities and Exchange Commission has been mulling a requirement that all advisers be fiduciaries, which would require Wall Street brokers to put clients’ interests ahead of their own in every recommendation. The standard would be tougher than current rules for brokers, requiring that they recommend “suitable” investments.
Registered investment advisers, however, overseen by the SEC and states, must already follow fiduciary rules. Many are already trying to distinguish themselves in an increasingly crowded marketplace by turning to firms like Dalbar Inc in Boston and fi360 in Bridgeville, Pennsylvania, which are seeing growing demand for their fiduciary accreditations. The companies offer labels like “Registered Fiduciary” (RF) or “Accredited Investment Fiduciary” (AIF).
The Institute for the Fiduciary Standard, a nonprofit group, is likely to launch a another certification process this year, according to its president, Knut Rostad.
Fiduciary designations take time and money. Instruction for one of the fi360 accreditations, for example, costs up to $1,950, and requires about 20 hours of study and six hours of continuing education per year.
Some advisers to retirement plan sponsors, who must follow the fiduciary rules of the Employee Retirement Income Security Act, say they have a strong incentive to highlight their fiduciary credentials. The Department of Labor is expected to propose strengthening those rules soon.
Other advisers say the fiduciary label simply helps their businesses. For example, Gregory Kasten, chief executive of Unified Trust Company in Lexington, Kentucky, says its assets under management have grown to over $4 billion from about $1 billion in 2005 thanks to clients’ awareness of his fiduciary responsibilities.
Moreover, the credentials mattered to Kasten personally. A former anesthesiologist, Kasten was used to professional testing and certifications. “I had to codify what I’ve been saying, instead of just ‘Hey, trust me,’” he said.
About 7,000 financial advisers use one of fi360’s certifications, said Chief Executive Blaine Aiken. Another 1,000 or so have certifications from three other fiduciary organizations, including Connecticut-based 3ethos, the companies say.
Not everyone is sold. Nicholas Olesen, a registered investment adviser in King of Prussia, Pennsylvania, is already a Certified Financial Planner, and is stopping there. The proliferation of credentials can confuse clients, he said. He wants a universal fiduciary standard from the SEC to level the field.
Yet more investors are paying attention to what it means for advisers to be fiduciaries. Ginger Scott, an adviser at Wabash Capital in Greencastle, Indiana, mentioned her “Registered Fiduciary” credential earlier this year in a local ad. A couple noticed and came in, mentioning a Consumer Reports story that said advisers should be fiduciaries, Scott said.
They opened an account with her that day. (Editing by Suzanne Barlyn, Christian Plumb and Matthew Lewis)