Most brokerage firms are staying mum about how they intend to meet their requirements under the new fiduciary rule in 2017, but some have tipped their hands and are going to go the approach that I thought they would.
State Farm, who happens to be the insurer for my cars, disclosed that they will only sell and service mutual funds, variable products and some bank products through a self-directed customer call center. That’s going to affect 12,000 State Farm agents around the country licensed to sell securities, which is two-thirds of the company’s 18,000 total agents. As of last year, State Farm managed $11.3 billion in assets it oversees in proprietary mutual funds.
State Farm is taking the approach that I’d advocate for any broker-dealer. Take on fiduciary responsibility and out it in the select hands of the people that are going to have the knowledge and training to be competent fiduciaries. I’m not going to denigrate 12,000 State Farm agents including my guy in Glendale, but their background is selling insurance. Let the call center handle investment products and let the insurance people sell insurance. It’s going to minimize the liability for State Farm and it’s going to help their clients by dealing with people in the call center that will have the training to make better investment guidance.
Take the power from the many and give it to the people who can be effective fiduciaries while being brokers at the same time.