Here’s an article about it in this week’s Wall Street Journal: http://tinyurl.com/clientsfirst
Quotes: “The latest controversy over a uniform standard began during the 2008 Wall Street meltdown, which led to the Dodd-Frank Act. An early version of the legislation would have required, simply, that brokers act in the best interest of clients. Brokers who work for insurance companies, however, lobbied fiercely against the language. The National Association of Insurance and Financial Advisors, a trade group based in Falls Church, Va., argued that a fiduciary duty is a vaguely defined concept that wouldn’t protect investors any better than brokers’ suitability requirement.
…”A fiduciary standard that prohibits brokerage firms from selling securities from their own inventories or branded with the firm’s name, for example, could upend current business practices and limit investor choices, says Chet Helck, a Sifma board member and chief operating officer of Raymond James Financial, Inc. “If you can’t sell your products to your customers, who do you sell them to?” he says.
…”The brokerage industry will have to embrace a fiduciary standard to remain competitive, says Mr. Aikin. “It is embarrassing to defend that you don’t believe the client’s interest should be put first,” he says.”
What standard is your advisor held to? Must her recommendations be merely “suitable” or is she held to a “fiduciary” standard?
At Euclid, we are registered investment advisors and held to the fiduciary, or clients first, standard. For more on the importance of the distinction (which seems like splitting hairs to some), here’s a Forbes article for you: http://tinyurl.com/forbessuitabilityvfiduciary.
It would only be fair to mention that we also believe that even those who honestly try to put their clients first, often are mistaken in their methods. That is, while it’s great to hold professionals to a more noble intent (fiduciary v suitable), that standard is no assurance of competence or knowledge. Is your advisor still using an archaic algebraic asset allocation model to predict the future? Or like the Wizard of Oz, is he using “risk tolerance” as the curtain behind which he pulls levers and creates smoke? If so, you might benefit from a quick phone call. We’re here. 301-704-2440.