February 3, 2010
Putting Investors’ Best Interests First: A Call to Apply the Fiduciary Standard Under the Investment Advisers Act of 1940 to All Who Give Investment or Financial Advice
We believe the future well-being of the nation requires that all Americans increase their savings and make the best possible investment choices. As investing has become more complicated, the role of advisors or brokers has become more vital. Investment Company Institute research found 73% of investors consulted a professional financial advisor before investing in a mutual fund. Unfortunately, not all financial advisors are required to be fiduciaries, who, by law, must put the client’s best interests first.
Therefore, we believe that all those who render investment or financial advice must meet the requirements of the fiduciary standard, as established under the Investment Advisers Act of 1940 and affirmed by the U. S. Supreme Court.
The fiduciary requirements of the Advisers Act are well established in case law, regulations and opinion letters. The key overriding mandates are highlighted in five core principles. These principles are:
- Put the client’s best interests first;
- Act with prudence; that is, with the skill, care, diligence and good judgment of a professional;
- Do not mislead clients; provide conspicuous, full and fair disclosure of all important facts;
- Avoid conflicts of interest;
- Fully disclose and fairly manage, in the client’s favor, any unavoidable conflicts.