July 28, 2010
A financial fiduciary operates on the principle of utmost good faith, which means putting the client's interest ahead of himself or his firm. This means not only disclosing all direct and indirect compensation, but also other potential conflict of interest. The public perceives that anyone who calls themselves a financial advisor is in fact operating under the fiduciary standard.
When regulators permit product salespeople or brokerage house employees who do not subscribe to the fiduciary standard to hold themselves out as financial advisors, regulators are then complicit in misleading the public.
It makes no difference whether the compensation is fee or commission, if at the time of sale a person is holding themselves out as a financial advisor. Any such person allowing themselves to be preceived as an investment advisor, should not only be recognized as a deemed fiduciary, but should also be properly qualified under the rules and regulations enforcing the Investment Advisers Act of 1940.
Anyone in the securities business selling any security or an insurance product that the public perceives to be a security, should not be allowed to call themselves a financial advisor unless they are acting as fiduciaries. They could clearly disclose that they are not fiduciaries and therefor not financial advisors but they should disclose their conflicts and the significance of not agreeing to be a fiduciary.