Salient to Investors:
If you ask your adviser to whom he or she owes their first legal duty of care, and you don’t get an immediate answer “you, as my client” then the chances are that they are not acting as a fiduciary. You can’t be a part-time fiduciary.
The first legal duty of financial advisers at firms like Merrill Lynch or Morgan Stanley is to their company and their work for you is covered by a looser “suitability” standard. The bait-and-switch nature of the “suitability standard” allows financial firms to publicize their devotion to their clients only to back away from them in arbitration hearings or lawsuits over conflicted advice and costly, inappropriate products. Wall Street advertising phrases like “ethically obligated” and “should make you feel” should trigger alarm bells – they are not the same as legally obligated and count little in an arbitration.
A fed study concluded that financial advisers who steered clients into more expensive or less attractive investment products ended up costing investors in IRA accounts between $8 billion and $17 billion in underperformance.
Those who argue that the high costs of accepting the fiduciary rule means it will become too costly to serve middle-class investors are trading on fear. Many firms have already cut back on their willingness to provide financial advice to smaller clients – nearly 4 years ago Merrill Lynch told its advisers that they would not be paid for working with new clients with less than $250,000 in assets.
Read the full article at http://www.theguardian.com/money/us-money-blog/2015/aug/13/financial-advisers-wall-street-fiduciary-standard-obama-administration
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