A prominent RIA firm is the first to announce it is joining a new registry of the strictest fiduciary firms in the country created by the Institute for the Fiduciary Standard.
Moisand Fitzgerald Tamayo is headed by Dan Moisand, a former FPA president who was also a CFP Board disciplinary official.
All firms on the new list, which launched over the summer, must abide by 12 best practice standards that minimize conflicts of interest. A recent study by the Institute for the Fiduciary Standard found that fewer than 20% of all RIAs potentially qualify for inclusion.
MUDDIED DEFINITIONS
The list was created in part because of muddied fiduciary definitions for financial advice at the CFP Board, the SEC, FINRA, the Department of Labor and the Consumer Financial Protection Bureau.
The Labor Department's fiduciary rule requires all firms and advisers to act as fiduciaries, but only when advising on clients' retirement accounts.
The registry "kind of cuts through the bull," says Moisand, who chaired the board's disciplinary and ethics committee in 2008 and served as the president and chairman of the FPA a decade ago. He also helped write the board's original practice standards between 1999 and 2001.
All the regulators and the CFP Board allow advisers to call themselves fiduciaries while doing financial planning. But those same advisers can also operate under the lesser legal standard of suitability when selling investment products – a process known as "hat switching."
CFPs WHO PUSH PRODUCTS
Critics charge that some firms and advisers who advertise that they put clients' interests first in fact push high-commission products that are not in those clients’ best interests. If those clients later pursue claims related to these investments against their adviser, then the accused often defend themselves by saying they were not delivering fiduciary-type advice.
The new registry "kind of cuts through the bull," says Moisand.
The registry is supported by TD Ameritrade Institutional and Pershing Advisor Solutions.
Its standards make it difficult for firms to have any broker dealer affiliations, insurance company affiliations or to offer any proprietary products
The CFP Board, for example, tells the public that all CFPs are fiduciaries when they are doing financial planning. However, nowhere does the board explicitly tell investors that CFPs may act purely as salesmen or saleswoman when the advice they provide is not considered an aspect of holistic advice.
NO 'HAT-SWITCHING' ALLOWED
As a large firm with nearly $400 million assets under management, Orlando-based Moisand Fitzgerald is paying $650 to appear on the list. Smaller firms, such as those that only charge their clients hourly fees, may pay as little as $175, says Knut Rostad, the institute's president. Rostad expects more firms to join the list in coming months.
Moisand says the registry will help him initiate conversations about fiduciary service with clients.
"When you have things like the DoL rule," Moisand says, "where you are a fiduciary, but you are a fiduciary on only certain types of accounts, it is an improvement, but it doesn't do anything to stop the confusion among the public."
For firms on the registry, he says, "There is no hat-switching. It's all fiduciary all the time."
