Reuters Money

The debate over what constitutes financial advice is heading into overdrive.

As part of the pending financial reform legislation, the job of establishing a higher “fiduciary standard” for brokers will rest in the hands of the Securities and Exchange Commission.  On June 25, I sent out an email blast to more than 200 financial advisers (and their press people) to get their opinions about the pending legislation. Overwhelmingly, I heard from independent advisers because the big brokerage firms rarely authorize their advisers to talk to the press directly.

Now the Reuters wealth management team got a chance to sit down with John Taft, head of the Royal Bank of Canada’s U.S. Wealth Management and CEO of RBC Capital Markets Corporation. RBC has more than 800 financial advisers in its stable.

The biggest challenge for the SEC, Taft says, is figuring out how the fiduciary standard will apply to advisers affiliated with brokerage firms, whose breadth of services tends to be much larger than independent financial advisers. “Wealth management firms do much more than just advise clients,” he says. For example, advisers who are attached to a brokerage firm also sell life insurance, offer lines of credit to investors, and trade securities like stocks “on a one-off basis.”

Taft expects the SEC to take a tiered approach when applying the fiduciary standard. “We are not afraid of the fiduciary standard. We act as fiduciaries all of the time,” Taft says. But the fiduciary standard cannot be a “one-size-fits-all solution,” he adds.

Once the legislation is signed into law, the SEC plans to study the issue for six months.

For more of our interview with Taft, check out this Reuters story.