Can a rank-and-file Series 7 holder who works for a major national broker/dealer ever truly work as a fiduciary? It’s a fair question.
Now that FINRA Chairman Richard Ketchum supposedly urged the SEC to convert all “financial advisors” to a fiduciary status (oh, and with FINRA as the SRO in charge!), let the debate begin. We’ve always argued for that, especially during the brouhaha around the so-called Merrill Lynch exemption. (Not sure about FINRA’s role, though.)
Although the SEC has a lot on its plate (it’s currently in session today trying to figure out how to better prevent Ponzi schemes), we hope Schapiro & Co. don’t let this issue slide down the list. We do think the investing public is confused and basically regards financial advisors, stockbrokers, insurance salesman, mortgage brokers—you name ‘em—to be acting in their best interests. We think it should be official: Let’s just punt the suitability standard and make financial types fiduciaries (most Series 7 holders are getting CFPS and Series 65s anyway). But in the blog FixingThe401k.com today, the author has an interesting point: Some products (such as some load funds) will just have to go away, since fiduciaries couldn’t sell them because of their relatively high fees.
Yes we can
I’m guessing you mean can a wirehouse FA ever consistently put his/her clients interests ahead of his own? Many, if not most, already do. Have you ever heard a pationate argument bewtween somone who does annuities and one who does not? You’ll hear both sides pationately making their case…..fees are BAD for clients, guarantees are GOOD for clients…in either case defending their clients!
My experience is the FAs are natural fiduciaries but the wirehouse management chain who comes up with “pro firm” compensation schemes needs to be brainwashed and reprogrammed.
I totally agree that most investors believe their advisor is (and should be) a fiduciary, who’s working in their best interest. Fred Reish, a top ERISA attorney, just spoke at the Fiduciary360 (fi360) National Conference and said B/Ds and wirehouses are seeing a seismic shift right now. He said change wouldn’t happen fast or be easy, but change is happening. He said there’s an awareness among top 401(k) producers at broker-dealer firms and with the dealers themselves, that the firms are going to have to let their top producers become fiduciaries and RIAs if they are to remain competitive and maintain business.
Fi360 (www.fi360.com) provides fiduciary education, practice management and resources for fiduciaries and is advocating for a robust fiduciary standard for ALL advisors – not a watered down compromise between that and a suitability standard and NOT enforced by an SRO such as FINRA.
Let’s hope that the regulatrors and legislators get it right this time.
Advice has been the centerpiece of the the full-service business model for 20 years. The providers of that advice are fiduciaries. In 26 years in the business, I never once heard a broker end a conversation with a client by saying, “By the way, once I make these investments for you, I have no further responsibility to you.” It’s coming. It’s inevitable.