Comments on: “Trust Me!” Sales talk, advice, and financial planning

By: Portfolio Management

Portfolio Management — Mon, 07 Sep 2009 08:08:31 +0000

Great Post. I am Sick of this Post

Actually, I agree some of the views of the author and some not.

Thanks
Raushan

By: Will Brown

Will Brown — Thu, 03 Sep 2009 04:27:26 +0000

While I greatly admire and agree with many points of Professor Frankel’s clear discussion I must agree with Roger Levy’s point – mostly on the basis of the reality of how the investment industry operates. The lines between RIAs/BDs/suitability/advisory/planning get crossed so routinely in reality that moving towards a single standard is the only path that makes sense to me.

If we all agree that the prime function of the fiduciary is to put the client’s interests at the forefront of decisions, then the idea of reinforcing lines becomes clearly about protecting institution’s interests. Is forcing the consumer to understand the subtleties between brokers, advisors, & etcetera really the best we can do?

By: Peter Savarese

Peter Savarese — Tue, 01 Sep 2009 12:45:33 +0000

The article by Tamar Frankel could not be more accurate. The problem is that the brokerage industry does not want the issue presented so clearly. There is certainly a role for products sold by brokers where they are compensated based on the product and the transaction — but this is for a product and not an ongoing service such as investment advice. If brokers had to compete with fiduciary advisors with full disclose (of the type outlined in Ms. Frankels article) they would not be in business very long.

I have more to say but no time now….

By: Roger Levy

Roger Levy — Tue, 01 Sep 2009 02:26:55 +0000

As someone who has practised law, conducted business as an RIA and held securities licences, I must respectfully disagree. Whether one is a fiduciary is a question of function not form. If a broker gives investment advice beyond whether a particular security is suitable, his advice is no longer incidental to his brokerage activity, and the quacking will make this duck a fiduciary. That there is confusion among the public, investment professionals and lawyers suggests the need for a single minimum standard that the courts can expand to counter the schemes of those who would seek to evade it.

By: Charles Stanley

Charles Stanley — Wed, 26 Aug 2009 14:24:18 +0000

To put it simply:
An Advisor should be an advisor and not a salesman.
A salesman should be a salesman and not be allowed to appear as an Advisor.
The distinctions between fiduciary and non-fiduciary positions should be made perfectly clear and reflected in “titles” given to financial representatives. The titles being used by many salesmen are, in my opinion, fraudulent and should be treated as such by the regulators.

By: Jan Sackley

Jan Sackley — Wed, 26 Aug 2009 02:10:23 +0000

There is room in the industry for different levels of service and care. In fact, a reasonable number of choices for the consumer is fair and desirable, as I discussed in an op-ed in Investment News (http://bit.ly/12Clrd). But the key is for the consumer to understand what type of professional you are, and whether or not you have a fiduciary duty. If you hang a shingle as advisor (or “counselor”, “investment manager”, or other terms implying that you work on the client’s behalf) you are a fiduciary. If you are a salesperson, you are not a fiduciary but you can create fiduciary liability for yourself depending on what you call yourself and what you tell the customer. In any event, clear disclosure should be required to be given as to your status as a fiduciary (or not) and how you are paid. See my op-ed for examples.
And if you are acting in a fiduciary capacity, the Duty of Loyalty should be followed and you should obtain consent for any conflicts, not simply bury them in Form ADV. A true fiduciary adviser never sells product.

By: Knut Rostad

Knut Rostad — Tue, 25 Aug 2009 19:03:24 +0000

Excellent discussion of the different roles of brokers and fiduciary advisers. The key point: generally, brokers may act in their own best interest, while fiduciary advisers must act in their clients’ best interests. These are opposing roles which most investors do not understand.

Knut A. Rostad
The Committee for the Fiduciary Standard