As debate continues about the potential for a fiduciary duty to be imposed on (most) advisors, either by the Department of Labor or the SEC (or both!), an implicit and sometimes explicit objection to the proposed changes are that it may be extremely "disruptive" to existing business models, and that many advisors couldn't survive without having the opportunity to charge at least some commissions in some circumstances to some clients (or alternatively that a large segment of the public would lose access to an "advisor" altogether if commissions are banned).
However, as today's guest blog post from legislative and regulatory consultant Duane Thompson explores, the reality is that commissions and a fiduciary duty are not entirely inconsistent with one another. In point of fact, even the Investment Advisers Act of 1940 does potentially allow for some commissions, and a look at the history of fiduciary law reveals other situations where a fiduciary duty and at least some forms of commissions have been allowed to co-exist (and client advice or advisor business models haven't necessarily been harmed as a result).
Certainly, the reality is that many forms of today's commissions would not be permissible under a robust fiduciary duty for advisors, but ultimately a fiduciary duty is largely about being able to demonstrate a process that was followed to affirm that a recommendation meant the joint duties of loyalty and care to the client... not that a fiduciary duty explicitly bans any and all forms of commissions. Nor are all commissions necessarily fatal conflicts of interest anyway, as evidenced by the fact that 12(b)-1 fees and investment adviser AUM fees often amount to near-identical compensation for near-identical recommendations to clients (even though technically one is a form of commission and the other is not). At a minimum, though, it's important to recognize that the fiduciary duty is not merely about permitting some types of compensation and banning others, but instead requires a more nuanced look at the advisor and the processes that he/she follows in implementing advice with clients... and that perhaps it's time in the fiduciary discussion to focus less on types of compensation paid for advice, and more on the standards and processes that advisors are expected to adhere to in delivering that advice!