Disclosures and client consent are insufficient – by themselves – to satisfy the fiduciary standard. Investors must be able to rely on and have confidence in the expertise of their advisor. This can only be accomplished by applying a standard that prohibits all conflicts of interest.
By Tamar Frankel — The SEC, authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act, should impose a fiduciary duty on all brokers (and similar financial professionals) who suggest specific securities to clients.
By Lorna A. Schnase — An investment adviser’s fiduciary duty derives primarily from common law and federal statutory law. There are two basic duties, those of care and loyalty. Some authorities list additional duties such as a duty of obedience, a duty to act in good faith, and a duty of disclosure.
Rulemaking – The Commission may commence a rule-making, as necessary or appropriate in the public interest and for the protection of retail customers, to address the legal or regulatory standards of care for brokers, dealers, investment advisers, persons associated with brokers or dealers, and persons associated with investment advisers for providing personalized investment advice about securities to retail customers.
Former Chairman Levitt testifies to the Senate in 2008 that the SEC can build market trust. His counsel is more pertinent today.
Many people have asked about the origins of the “Butcher versus Dietitian” white board video recently popularized by Hightower Advisors and Tony Robbins. Its an excellent video, no doubt. Full disclosure, the first rendition of this story line to explain the differences between a broker and investment adviser in recent times (that I am aware of) was actually ten years ago when Harold Evensky and I collaborated on the idea in a different format and medium. Click the link above to see the PSA and news release. Knut