Lots of good comments on my Aug. 30 blog (The Wall Street Journal’s Contribution to the Fiduciary Argument), and not all of them came from folks who agree with my point. While, “NotEntitled” was also clearly not a big fan of my position, he or she did make two valid points that are worth exploring.
The first point succinctly captures the essence of the entire current fiduciary debate:
“Brokers are brokers. Advisors are advisors. Consultants are consultants. Some professionals are all of the above. But not all brokers are providing advice or consulting. So why force all sales agents to adhere to a fiduciary standard?”
If it were only this simple. But, come on, we all know that it isn’t, don’t we? In addition to the practical experience of virtually everyone reading this (including me), study after study has demonstrated well beyond a shadow of a doubt that the vast majority of retail investors do not understand that brokers are, in fact, simply salespeople who do not have a legal duty to act in their clients’ best interests.
What’s more, in my years of experience covering advisors and brokers, I’ve come to realize that this “confusion” is no accident: from titles such as “financial advisor,” “trusted financial advisor,” “financial consultant,” “wealth manager,” and “financial planner,” to their multimillion dollar ad campaigns, Wall Street appears to do everything in its considerable power to confuse the issue.
While I’ve grudgingly admitted that, if worded properly, disclosures spelling out the differences between brokers and advisors could solve the problem, I don’t think anyone outside of SIFMA, FINRA, and the SEC truly believes that clear-enough wording will ever be forthcoming. So the simple answer to NotEntitled is that if securities salespeople would only act like salespeople, we wouldn’t be having this discussion.