Ruling Near on Fiduciary Duty for Brokers

investment adviceMy Comments: I’m proud of the fact that I’m held to a fiduciary standard. It’s in my best interest as a professional to be held to the same standards as attorneys, CPAs, physicians, and the like. My focus has to be on what is best for my clients, and that’s a good thing.

Readers of this blog have read my thoughts on this before. I’ve argued time and again that ANYONE holding themselves out as a “financial advisor” must conform to a fiduciary standard. At its most basic, this simply means acting in the best interest of the client. Period.

Now that it looks like this is likely to be resolved by the SEC in the near future, big financial companies across the spectrum are once again trying to keep themselves and their salesmen from being held to this standard. Their argument now is that it will hurt middle income investors.

My reaction is that middle income investors are already hurt by the often misleading, and deceptive practices of said same financial companies. These companies don’t want to be held accountable if one of their people makes a “mistake” and you, Mr. and Mrs. Middle Income Investor, gets hurt in the process.

By Daisy Maxey | Updated April 13, 2014

The debate over a new level of protection for investors in their dealings with brokers may finally be nearing a resolution. And some investor advocates worry about the direction it seems to be taking.

The debate centers on whether brokers should be required to act in the best interest of their clients when giving personalized investment advice, including recommendations about securities, to retail investors.

The “best interest” standard is known as a fiduciary duty. Financial advisers registered with the Securities and Exchange Commission already are held to this standard. But brokers for the most part are held to a different standard, of “suitability,” which requires them to reasonably believe that any investment recommendation they give is suitable for an investor’s objectives, means and age.

The Dodd-Frank Act, signed into law in 2010, directed the SEC to study the matter, and permits the regulator to establish a fiduciary standard for brokers. In late February, SEC Chairman Mary Jo White said the commission would make a decision by year-end.

Meanwhile, the Labor Department is working on a separate proposal that could establish a fiduciary standard for brokers who give advice on retirement investing. It hopes to offer a proposal by August.
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