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

Aug 01


An Adviser's Guide to Developing NextGen Talent

As the registered investment advisory business matures, it's clear we need to focus on a new generation of talent.Research from InvestmentNews shows that firms of seven or more full-time individuals employing at least one NextGen... Learn more

Featured video


Stephanie Bogan: How financial advisers can achieve more by reframing their realities

By revaluating the choices they make and the outcomes that result from them, financial advisers can make sure they're properly serving those most important to them — their clients, according to Stephanie Bogan, founder of Educe Inc.

Latest news & opinion

DOL fiduciary rule causing DC-plan record keepers to change business with insurance agents

Principal has communicated that independent agents must change their business models to keep receiving compensation.

DOL fiduciary rule opponents want to push implementation back until 2019

ICI, Chamber of Commerce among groups asking for delay, while Democratic lawmakers call on DOL to keep to its earlier planned schedule of Jan. 1, 2018.

Take 5: Vanguard's new CIO Greg Davis talks bonds, stocks and costs

Having just stepped into the role, this veteran of the firm now oversees $3.8 trillion in assets in more than 300 mutual funds and exchange-traded funds.

Tech companies deploy behavioral finance tools for advisers

They seek to turn knowing more about clients into growing more revenue.

Retirement planning for women

Longer lifespans and lower savings require creative income strategies.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print