A fiduciary duty gives investors the best possible shot at prospering because it enables them to get advice formulated entirely on what’s best for the investor, unfettered by conflicts of interest that usually involve high fees.that most Canadians will outlive their savings by a decade or more. Think about that for a moment. And while you’re thinking, do the math.
So, what’s the answer? Spend less? That’s good advice for those engaging in frivolous consumption, but they’re not the norm. The trouble is, if we’re not careful, the cost of that guidance will consume whatever value-add advisors can provide, and then some. Over the course of an investing lifetime, the compounding drag of commonly charged fees for investment advice and product distribution can easily strip out half the gains from a portfolio.
With that in mind, the World Economic Forum penned these words as part of its prescription for averting a tsunami of bankrupt seniors: Instead, they hammered out a more modest set of standards – the “client-focused reforms” – that preserve current rules but infuse some of them with best interest principles. This compromise will enhance investor protection somewhat. However, it was accomplished by adjusting those best interest principles to fit the contours of the investment industry’s existing business models, not by requiring the industry to adopt fundamentally different practices.
First, our regulators must enforce the newly infused rules rigorously to ensure those reforms are as meaningful as they can be. That’s the easy part.