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Placing the Public’s Interest at the Forefront

HandshakeThe CPA profession has a long-standing history of serving the public interest, with more than 125 years of providing services in the highest professional manner. As individual clients’ financial worlds become increasingly complex, many CPAs have responded by expanding their service offerings beyond traditional tax compliance and planning to include investment, estate, retirement and risk management advice.

The landmark Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in the wake of the economic crisis of 2008, required that the Securities and Exchange Commission conduct a study on the effectiveness of the existing standards of care for financial professionals. The study covers CPAs who provide investment advice and personal financial planning services to their individual clients (download the free CPA’s Guide to Investment Advisory Business Models to determine if you have a registration requirement). Currently, broker-dealers and investment advisers operate under different standards of care.

On March 1, 2013, the SEC requested data and other information on a uniform fiduciary standard of conduct, and also requested comments on proposed concepts. Various elements of this request raise concerns that the standard would ultimately be weakened. The AICPA along with other like-minded organizations sent a letter on June 4 to SEC Chairman Mary Jo White urging her to establish a standard that is at least as strong as the existing standard for investment advisers.

The AICPA delivered a second letter on July 5 to Chairman White, emphasizing our position that the public’s interest must be placed at the forefront. We believe that, at a minimum, the following principles must be present when providing personalized investment advice to retail investors:

  1. Act in the best interest of the investor
  2. Maintain objectivity
  3. Act with due care
  4. Provide full disclosure of any unavoidable conflicts of interest
  5. Attain client consent if an unavoidable conflict exists
  6. Maintain confidentiality of all client information
  7. Disclose commission and referral fees

The complexity of investing does not lend itself to an environment in which investors can quickly and easily evaluate an adviser’s competence and prudence. Also, studies have shown that investors place a high degree of trust in their adviser and are often unaware that not all advisers are required to place the investor’s interest first. Therefore, it is important that all advisers providing personalized investment advice to retail investors be held to a minimum standard of care as outlined above.

Further, the free flow of capital from investor to investment requires objective advice unimpaired by conflicts of interest. The enormous negative impact on capital markets, society and the economy when advice is driven by an adviser’s self-interest is not quantifiable.

Regardless of the adviser’s business model, the AICPA believes that it is critical that the public receive the highest standard of care when receiving investment advice, and as CPAs, our history and reputation of protecting the public interest remains at the forefront.

Do you believe all advisers, regardless of affiliation, who provide personalized investment advice should have to follow a fiduciary standard of care and behavior when dealing with their clients (i.e. always putting their clients’ interest ahead of their own)? 

Clark M. Blackman II, CPA, Founder/CEO of Alpha Wealth Strategies, LLC. Clark has been active in the AICPA PFP Section for two decades and is the immediate past chair of the PFP Executive Committee, current chair of the Fiduciary Task Force, 2012 recipient of the PFP Distinguished Service Award and member of the Advanced PFP and Advanced Estate Planning Conference committees, among others. Under his leadership, the PFP Executive Committee last fall received standard setting authority from the AICPA’s Governing Council.

Handshake image via Shutterstock


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