Fiduciary duty for brokers would oppress, not protect

Oct 18, 2009 @ 12:01 am

As an attorney who frequently advises brokers, broker-dealers and financial advisers, I read the article “Debate over fiduciary duty heats up,” which appeared in the Oct. 5 issue, with interest and some dismay.

Extending the investment adviser's full-blown fiduciary duty to brokers acting in non-discretionary accounts — i.e., merely those who “recommend” purchases — is fraught with so much potential mischief that it undoubtedly has the plaintiff's securities bar rubbing their already sweaty palms together with glee over the prospects.

A broker is a broker, and an adviser is an adviser. If brokers are now going to have the same fiduciary duties that advisers have, simply because they render some adjunct “investment advice” when they make recommendations, there is no telling where the liability will stop.

Brokers who charge a commission only, who garner no fee for financial planning or managing even part of a client's affairs, will find themselves embroiled in far-flung lawsuits and arbitration hearings that no one in their right mind could envision, all under the banner of “breach of fiduciary duty.”

Frankly, it is fiction to suggest that anyone could possibly hope to set the lines at something approaching guidance under the circumstances that the Securities Industry and Financial Markets Association is proposing, much less what the Obama administration has in mind. Ultimately, the logical conclusion of all this will of course will be “one size fits all.”

This de facto standard will en-snare brokers in an ever-expanding web of vague “fiduciary obligations,” which neither benefit the investing public nor give the industry's brokers a fighting chance to avoid the “fall guy” role that everyone seems to be searching for in the wake of the Madoff debacle.

Hopefully, we will come to our senses and realize that the overwhelming majority of brokers are hardworking, honest people with their clients' interests in mind — without the need for new obligations which oppress but don't protect.

David A. Genelly


Vanasco Genelly and Miller


Key issue in industry: How advisers are paid

The Oct. 5 Other Voices column by Michael Chamberlain, “Let's call a spade a spade and a salesperson a salesperson,” is a perfect example of why we can't have civilized discussions anymore.

People tend to be so one-sided that they only want to alienate anyone who doesn't agree with them.

Mr. Chamberlain did just that when he resorted to name-calling to try and make a point.

A salesperson is simply a person who sells a product or service, and that pretty much sums up the bunch of us: investment adviser representatives and broker-dealer reps. Whether you are selling advice or selling products, you are selling.

The major difference is in how we are paid. (How many of us have ever told a client: “Over the next five to 10 years, you will pay me significantly more than you would a broker-dealer representative”?).

You can't regulate or give a title to the Bernard Madoffs of the world. You can slow them down, and you can make it more difficult for them to operate.

However, if someone wants to cheat, they are going to cheat. It doesn't matter what title is placed after the comma on their business card.

I think that we all could better serve the investing public if we were more concerned with the name before the comma on our business card than with the title after it.

David King


Rogers Financial Group

Greenville, S.C.


What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Apr 30


Retirement Income Summit

Join InvestmentNews at the 12th annual Retirement Income Summit - the industry's premier retirement planning conference.Much has changed - and much remains to be learned. Attend and discuss how the future is full of opportunity for ... Learn more

Featured video


Geoffrey Brown: What's top of mind at NAPFA?

NAPFA is looking ahead at the rest of 2018 and has a broad agenda that includes improving diversity in the advice industry. What's next? Geoffrey Brown offers his insights.

Latest news & opinion

10 fastest-growing IBDs

These independent broker-dealers saw the biggest percentage gains in their revenue in 2017.

The unique nature of working with celebrity clients

Athletes and entertainers are just like everyone else — aside from complex tax issues, a lack of financial savvy and a need for prenups

Top 10 IBDs ranked by revenue

These independent broker dealers generated the most revenues in 2017.

8 podcasts advisers listen to when they aren't working

Listening to podcasts for the fun of it.

UBS continues to cut loans to recruits, while increasing compensation to brokers

The wirehouse reduced recruitment loans 20% and increased bonus loans 68% in the first quarter.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print