Despite opposition in the brokerage industry to a uniform standard of care, one industry heavyweight believes a fiduciary standard can coexist with the sale of high-commission products.
“In the most basic form, working for your client as a professional, you work to achieve the objective of the client and put their interest ahead of all others,” Chet Helck, chief executive of the private client group at Raymond James Financial Inc., said at a company conference Thursday. “That's a fiduciary standard, and that's a principle more than it is a tactic. It's a principle that drives the tactic.”
The concept of doing what's in the client's best interests is of particular importance when clients are considering putting money into complex alternatives such as nontraded real estate investment trusts and structured products , Mr. Helck noted. He believes clients armed with the appropriate disclosures can make an informed decision.
“I'm sure there are examples of nontraded REITS that outperformed because they had a superior business plan,” Mr. Helck said. “And while they had higher commissions, they tended to be better for the client.”
Mr. Helck noted that even though they are known for risk, some private-equity investments generate extraordinary returns. “You [as the investor] should be allowed to do that if you're sophisticated enough to understand what you're getting into,” he said.
To begin with, broker-dealers must decide whether they want to offer those investments, Mr. Helck said. Raymond James doesn't offer nonlisted REITS.
“We were never comfortable selling nontraded REITS because you can buy similar products in the publicly traded REIT market with lower costs and better liquidity,” said Mr. Helck, who also is chairman of the Securities Industry and Financial Markets Association.
The brokerage has knocked other, more-pedestrian offerings — annuities, for instance — from its shelf for being too costly.
“We might decide we don't want to offer that because we're not willing to stand behind it,” Mr. Helck said. “Clients can decide if they want to do business with us. And sometimes they won't.”