Law firm Davis & Harman conducted a study on the effect of a strict fiduciary standard applied to those who advise IRAs. Investment News reports that the requirement will have a major negative impact on the holders of small accounts. The firm found that almost half of the 22 million brokerage IRAs would have insufficient assets to justify migrating to a fee-based platform. All accounts would face a steep increase in the account fees charged. What is not clear is how much savings an investor would realize in the elimination of commissions, marketing and shareholder servicing costs.
The notion that an additional liability can be imposed on an industry without increasing the costs to the consumer is spurious. By and large, investors are able to determine for themselves the appropriate cost effective means for accessing advice. Mandating a fiduciary responsibility is imposing an unnecessary cost.
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