Today, there are more than a dozen different fiduciary standards. To simplify this patchwork of regulatory rigor, we’ve broken the standards into three different modes.
Your success as a financial services professional will depend upon your capacity to know when and how to employ each of the different modes.
Mode #1: New Regulatory Standards
Depending on your registered status as an advisor or broker, you’re probably subject to new federal and/or state fiduciary standards. If you carry the CFP mark, you’ll also be subject to the CFP Board’s re-released fiduciary standard.
There’s another critical shortfall with these standards – they don’t provide a framework that you can use to help train your lay-fiduciary clients who are managing the assets of pension plans, foundations, endowments, or personal trusts. That’s a significant oversight since 80% of our nation’s liquid investable wealth is in the hands of the more than 8 million lay-fiduciaries.
You also need to know that these new standards do not meet the requirements of ERISA’s procedural prudence standard. This standard is much higher than the best interest standard defined by new regulatory standards.
Mode #2: Prudent Investment Practices
To meet the requirements of ERISA’s procedural prudence standard you need to demonstrate the details of a prudent decision-making process that integrates fiduciary best practices and generally-accepted investment management principles.
Mode #3: Leader-led Fiduciary Standard
Ten years ago we decided to evolve and elevate fiduciary standards by examining the differences between ‘good’ and ‘great’ fiduciaries.
To be a successful fiduciary, you need to demonstrate that you: (a) are compliant with applicable fiduciary rules and regulations; (b) incorporate fiduciary best practices; and, (c) follow a procedurally prudent decision-making process.
To be regarded as a great fiduciary, you also need to be recognized as a point of inspiration for moral, ethical, and prudent decision-making.