fiduciary standards

/Tag:fiduciary standards

Weighing In- Politicians Protect Wall Street Executives

It is a travesty of justice that Wall Street executives can rip-off consumers for billions of dollars each year with no accountability for the damage […]

Diminished Capacity and the Fiduciary Standard

Sometimes inaction is the right action (the fiduciary standard) when faced with an elderly prospect that presents signs of diminished capacity.

A few weeks ago, I […]

5 Reasons Not to Invest with Financial Advisors at a Brand Name Firm

Too many investors select financial advisors from brand firms because they believe it is a safer decision. But, are they really safer based on misleading […]

Should Stockbrokers Be Held to the Same Ethical Standards as Financial Advisors?

There is one compelling reason why stockbrokers should be held to the higher ethical standards as financial advisors. Right now stockbrokers are held to a vague ethical standard called “suitability”. They are supposed to make suitable recommendations based on the knowledge of the client. However, what is suitable for one client may be unsuitable for another client with the same characteristics.

Financial advisors are also required to make suitable recommendations. However, financial advisors are held to an additional ethical standard, the highest standard in the financial services industry, that requires them to always put investor interests (achieve financial goals) ahead of their interests (make money). This standard for financial advisors provides a lot more protection for investors and a lot more liability for financial advisors and the firms that hold their registrations.

So what is the one compelling reason? It is based on a regulation that confuses investors and makes deceptive sales practices legal. Stockbrokers are allowed to make “sales recommendations” when they sell investment products. Financial advisors are allowed to provide ongoing “investment advice” when they sell investment services. You tell me the difference between “recommendation” and “advice”. There is none. This is the compelling reason why stockbrokers and financial advisors should be held to the same ethical standards. […]