Citi Releases White Paper About Meeting Fiduciary Standards

The white paper focuses on the top issues financial advisers could face with potential new rules recommended by an SEC staff study on uniform fiduciary standards for both broker/dealers and registered investment advisers (RIAs). The white paper is titled “Broker-Dealers as Fiduciaries? How the SEC Staff’s Study Could Raise the Bar for Investment Advice.”

Although new rules have not yet been issued, an SEC staff study recommended adopting a uniform fiduciary standard (the standard currently applied to RIAs) for RIAs and broker/dealers providing investment advice to retail customers. The paper cites improved wealth management technology as not only vital for broker/dealers to bridge the gap between their current suitability standard and fiduciary principles, but also for RIAs to effectively deliver services in their clients’ best interests.

The paper highlights that many aspects of a broker/dealer’s and RIA’s day-to-day activities—from creating investor proposals to account on-boarding, suitability assessments, fee arrangements, initial portfolio implementation and portfolio rebalancing—may be significantly impacted.

“Financial advisers can expect significant technological and operational challenges to adhere to any new fiduciary standards,” said Andrew Clipper, head of Wealth Management Services in North America, Citi’s Securities and Fund Services, and one of the white paper’s authors. “Financial advisers and their firms can stay ahead of the tide of regulatory change by leveraging the latest technologies that provide automation and holistic management.”

The paper also points out other areas of improvement for broker/dealers and RIAs:

• Automatic linkage from front-to-back of an investor’s information, risk profile, restrictions, proposed portfolio and portfolio execution;
• Access across all investment vehicle types within and across multiple accounts in the household;
• Household reporting and rebalancing across multiple account types (e.g., brokerage, retirement, trust); and
• Tax optimization at the individual investor (tax return) level and across the household.