The Fiduciary Illusion

For years, the industry has been debating who should be considered a fiduciary. Should brokers be held to a fiduciary standard? Should rollover advice trigger fiduciary status? Where should the line be drawn? But this debate has always seemed incomplete. It assumes the problem is how we define advice, but the deeper issue is how advice is paid for and experienced.

We now have a system where brokers can operate with conflicts, Registered investment advisors can meet fiduciary standards while charging fees that are not tied to actual work, and plan sponsors and participants often have no idea what they are paying in dollar terms or what they are getting in return. So we keep arguing about labels while the structure stays the same.

Labeling brokers as fiduciaries is like requiring someone to be objective while paying them to be biased. And calling it a fiduciary system does not make it one, especially when RIAs are labeled as fiduciaries without any mechanism that actually forces accountability.

There is no invoice, no defined scope of work, no real time experience of cost, no ongoing explanation of services, and no natural moment where the plan sponsor has to decide if the value is worth it.

That is why behavior does not change, even among well intentioned advisors. In any normal market, this absence of progress would be obvious. You would get a bill, see the cost in dollars, understand what you are paying for, and decide whether to continue. That mechanism does not exist here.

Repeated attempts to expand fiduciary definitions have led to significant litigation, with limited durable impact on the underlying structure of how advice is delivered and paid for. At some point, it is worth asking whether we are trying to solve a structural problem with legal definitions.

Even the latest discussion around the fiduciary rule just reinforces how much focus is still on definitions instead of structure. The issue was never just conflicts. It’s that the system was never set up to function like a market in the first place.