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Von Aldo

The Fiduciary Problem

Can a rank-and-file Series 7 holder who works for a major national broker/dealer ever truly work as a fiduciary? It's a fair question.

Now that FINRA Chairman Richard Ketchum supposedly urged the SEC to convert all “financial advisors” to a fiduciary status (oh, and with FINRA as the SRO in charge!), let the debate begin. We’ve always argued for that, especially during the brouhaha around the so-called Merrill Lynch exemption. (Not sure about FINRA’s role, though.)

Although the SEC has a lot on its plate (it’s currently in session today trying to figure out how to better prevent Ponzi schemes), we hope Schapiro & Co. don’t let this issue slide down the list. We do think the investing public is confused and basically regards financial advisors, stockbrokers, insurance salesman, mortgage brokers—you name ‘em—to be acting in their best interests. We think it should be official: Let’s just punt the suitability standard and make financial types fiduciaries (most Series 7 holders are getting CFPS and Series 65s anyway). But in the blog today, the author has an interesting point: Some products (such as some load funds) will just have to go away, since fiduciaries couldn’t sell them because of their relatively high fees.

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