Smart Money

Hearings before the Financial Crisis Inquiry Commission (FCIC), started off with a bang on January 13, when Goldman Sachs Chairman and CEO Lloyd C. Blankfein testified that at Goldman Sachs, "...

The Commission heard as well from JPMorgan Chase & Co. Chairman and CEO, Jamie Dimon, Morgan Stanley Chairman John Mack, Bank of America CEO and President Brian T. Moynihan. Testimony for all participants can be seen at the FCIC Web site.

This is the first time that the head of one of the large broker/dealers has stepped up to publicly state support for the fiduciary standard--and by extension, individual investors. The extension of the fiduciary standard that applies to investment advisors, to broker/dealers who provide advice to investors, is part of the Senate's proposed discussion draft of financial services reforms, as it stood on December 10. The House passed similar requirements on December 11, in H.R. 4173, the Wall Street Reform and Consumer Protection Act.

Blankfein said earlier in his testimony how important the advisory business is to Goldman Sachs. (Of course we understand that this is not all retail advice.) "We have been particularly focused on fee income businesses, such as advisory, commissions and asset management fees, and since our IPO more than ten years ago, we have generated half of our income from them. We continue to see the benefits of a diversified revenue stream across a global franchise centered around integrating advice, execution, financing and co-investing with best-in-class risk management to a broad range of largely institutional clients."

Not only does Goldman's CEO look like an investor's champion, he gets the prize for being first to ride in on his white horse and take this greatly needed step toward restoring investors' faith or at least good will toward those who serve them in the financial services industry.

Will other brokerage CEOs follow suit?

I contacted Morgan Stanley about this issue, and spokesman James Wiggins responded by email: "Morgan Stanley Smith Barney is working through our industry association, SIFMA, which has endorsed the idea of a uniform national fiduciary standard and is engaged with the policymakers in Washington to implement it in a way that preserves our ability to offer the full range of services that our clients want."

JPMorgan Chase and Bank of America/Merrill Lynch have not responded to requests for interviews or comment as of press time.

Comments? Please send them to Kate McBride is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.

Read more Wealth Manager: Viewpoint blog posts:

Ever Hopeful December 29, 2009 As we emerge from a challenging economic crisis, there is reason to hope that changes and opportunities we will see in this new year--some as a direct result of the economic crisis--will be positive.... Schapiro's Call for Fiduciary Standard Reflects SEC's Original Mandate December 07, 2009 "I believe that all securities professionals should be subject to the same fiduciary duty," says SEC Chair Mary L. Schapiro.... Mr. Dodd's Message from Washington November 16, 2009 Now that we have heard from both the House and Senate committees on finance and banking about investor protection, let's not misinterpret what they are saying. Can the DJIA at 10,000 Inspire "Animal Spirits?" October 16, 2009 The Dow Jones Industrial Average hit a year-to-date high and jumped above 10,000 on Oct. 14, and the next day hit another high of 10,062.94. Unless you are short, this is good news for you and for your clients. "Federal" versus "Authentic" Fiduciary Duty October 08, 2009 Both investment advisors and broker/dealer registered representatives routinely give financial and investment advice to clients. What is still different is the rules that protect those investors....
Reprints Discuss this story
We welcome your thoughts. Please allow time for your contribution to be approved and posted. Thank you.

Most Recent Videos

Video Library ››