August 30, 2010
I have conducted over 350 compliance examinations of both broker-dealer and investment advisory firms and offices over the last 8 years. Previous to that time I was a registered representative in the securities business for over 17 years.
In all that time I have never found a registered representative or investment adviser representative that has ever answered this question with a "NO" –
"Dont you always act in your client's best interests?"
I also have never interviewed a client, at least not one that is not currently part of a law suit or arbitration that does not feel that their agent (RR or IAR) is and should be acting in their best interests.
With these two statements in mind I continue to be amazed that this continues to be such a huge issue and point of contention.
Now dont get me wrong, after being a regulator for 8 years I am fully aware of the legal ramifications of this decision and I am sure there are more than a few attorneys out there that are salivating at the prospect of all the new lawsuits and hearings that will arise if everyone is placed on a true fiduciary basis.
But as regulators (both at the state and federal level), is it not our primary task to protect the consumer? It seems to me that the only time I ever here the argument that I should only to be held to a suitability standard is when something has gone wrong and the representative or firm is under investigation, in an arbitration, or in a law suit.
As an alternative, lets make any representative or firm that chooses to be under the suitability standard make a very clear statement to their clients. Something like this should be sufficient -
"Oh, by the way, there may be times when I really do not act in your best interest but instead sell you a product that makes either me or my firm the most money - Just thought you should be aware of that – sign here."
Since no salesperson in their right mind would make that statement, or have any clients if they did, that should solve the problem without having to put everyone under a true fiduciary standard.
If this sounds a little harsh – again let me state – in over 25 years in this business I have not found one representative that answered NO – so whats the problem?
Let's do our job, do what's right for the consumer, eliminate the confusion, and make everyone that deals with clients a true fiduciary.