July 28, 2010
This is really absurd to apply a fiduciary standard to a "stockbroker" that is clearly not in control of the final buy or sale decision - the client retains that power to himself and only looks to the broker for suggestions about transactions, to monitor his stocks and give him notice if the broker sees something of interest that the client might like to be aware of or the client brings the broker an investment idea and the broker will provide a "sounding board" to give the client an additional opinion about the stock itself and the suitability to the client but the final decision to authorize the trade is clearly the clients. The client has MADE the decision to retain the power to make the transaction decision and to retain the power to design his or her portfolio. THE CLIENT knows he could give this decision power to a professional RIA but has made the decision to make his own decisions. THerefore clearly the client is the FIDUCIARY of his own account-- if he signs a management agreement -- then the power to make decisions on transaction passes to the RIA -- and it's not unreasonable that then this RIA is the fiduciary.
This idea of making retail brokers fiduciaries is no doubt driven by the discount firms that somehow get themselves exempted from suitability rules and likely this fiduciary standard all because they reduce their commissions to $9 a trade? What is that about?
The client has to retain some responsibility for their own decisions -- they are given alternatives as requested by the client of the broker-- but the final decision is retained by the client-- clearly the decision making party is the Fiduciary if there is any meaning to that phrase.
Next it will be argued that if a client wants to execute a trade that was unsoliciated by the broker that the broker is completely responsible if the client loses money on a trade the client originates and enters on his own decision.
When is the client responsible for his own final decision?
And why does the amount of the commission define the obligation of the broker as to suitability of the trade for the client?
Taking management control of the decision to buy or sell - in writing from the client-- should be different than just helping the client with ideas and suggested trades.
There are Good brokers that do try to fulfill this role for clients-- working with the client as a "paid" helper to give the client aid in managing his assets but the client has the final decision on what to buy and sell and when -- the client is clearly his own fiduciary in the traditional broker/client relationship.