As the debate around the fiduciary standard continues, lawmakers have once again expressed concern about whether the application of a fiduciary standard may raise the cost of advice for consumers, cutting off access to investment advice for the middle class.
Yet even as this anti-fiduciary argument persists, a closer look reveals just how ridiculous it is. The RIA marketplace is not less profitable than the brokerage world due to its fiduciary compliance costs; in fact, brokers are finding the fiduciary RIA world so much more appealing that the breakaway broker trend has persisted for years.
Instead, the real challenge is that the market for advice is so complex, consumers have trouble choosing at all, and as research has shown, such environments of “information asymmetry” can lead to a “market for lemons” where the quality declines as dishonest businesses drive the honest ones away. In turn, this suggests that in the end, applying a consistent fiduciary standard for those who offer advice may actually be the single best way to drive down the cost of advice for consumers!