Isn’t it odd that any investment company would fight a requirement to act in their client’s best interest? Well, believe it or not, some firms are doing just that according to The New York Times. You simply can’t make this stuff up. Here’s an excerpt from the New York Times article, “Struggling Over a Rule for Brokers.”
At issue is whether brokers should be required to put their clients’ interest first — what is known as fiduciary duty. The professionals known as investment advisers already hold to that standard. But brokers at firms like Merrill Lynch and Morgan Stanley Smith Barney, or those who sell variable annuities, are often held to a lesser standard, one that requires them only to steer their clients to investments that are considered “suitable.” Those investments may be lucrative for the broker at the clients’ expense.
You mean to tell me that brokers might be selling lousy investments for self-serving purposes? Shocking. As a side note, I personally witnessed the shenanigans at a large brokerage house where my naïve beginnings in the “business” started.
I simply couldn’t get out of the broker-commission-salesman arrangement quickly enough because it was the antithesis of anything humanly optimal (for investing, for treating clients like a true partner, etc.). Knowing what I’ve seen, I would never give my money over to any broker—ever. There are far superior choices in the financial industry than handing your money over to a broker in my humble opinion, more on this in just a moment. Here’s more from the New York Times article:
Over the years, it has become more difficult for consumers to understand where their advisers’ loyalties lie, especially as the traditional stock-peddling brokers have started to look and act more like financial advisers. The fact that some brokers can wear two hats with the same client — that is, provide advice as a fiduciary in one moment, but recommend only “suitable” investments in the next — only adds to the confusion, experts said.
There’s no question that being a consumer has never been harder: from buying a new television to buying wholesome products to picking an investment advisor to work with for the long haul.
However, the confusion on where your advisor’s loyalty might exist can be quickly simplified and eradicated when you choose to work with an advisor that works as a Fee-Only Investment Advisor and cannot and will not make a commission off you or anyone else, ever.
If your broker/advisor isn’t Fee-Only, find one. That is if you’re looking for an advisor that is required by law to put your interests first, without reservations.
According to Cerulli Associates, a leading financial research firm, only 4% of advisors can claim the Fee-Only model. This is unfortunate for consumers but fortunate for my firm Green Partners, LLC. It’s an important structural advantage and gives us a solid, competitive advantage in the industry. And since we don’t like to abdicate investment responsibility to third party products, we tend to be far more competitive on fees as well (!)
