Most investors believe that financial advisers at brokerage firms are fiduciaries who are required to put clients’ interests first, because many firms hold out their brokers as “financial advisors” and because brokers ought to be held to a fiduciary standard, according to a Bloomberg article by Lexis Leondis called “Clueless Investors Think Brokers Are Fiduciaries, Survey Says.”
The survey was conducted by the Consumer Federation of America, AARP and North American Securities Administrators Association.
According to Barbara Roper, director of investor protection for the Consumer Federation of America, “This lack of understanding is not because investors are stupid; it is because, bluntly stated, the policy itself is stupid.” In other words, the current policy of not requiring brokers to put their client’s interest first is shockingly wrong.
The Securities and Exchange Commission is scheduled to report to Congress in January on investor protection and a possible universal fiduciary standard rule as part of the financial services overhaul that became law on July 21. The rule would apply to anyone who gives investment advice, including brokers and those insurance agents who are dually registered as brokers.
Almost all the survey respondents (97%) said they support a fiduciary standard for investment professionals providing advice. About 90 percent of investors said that a stockbrokers who provide investment advice and investment advisers should have the same duties to customers.
“Older Americans expect financial professionals to put their client’s interest ahead of their own when giving investment advice, but that’s not a requirement for all professionals today,” Nancy LeaMond, executive vice president of the AARP, was quoted as saying. “The need for the SEC to be a watchdog for investors is even more urgent.”
Will the SEC step up for investors and require brokers to abide by the fiduciary standards imposed by the Investment Advisers Act of 1940 (Advisers Act), as recommended by Commissioner Luis Aguilar? Or will the SEC once again show why it is a “captive agency” by watering down that standard as urged by its friends in the securities industry? Stay tuned.
J. Boyd Page, senior partner of Page Perry in Atlanta, observed that “In many cases, investors can easily prove that a broker is a fiduciary simply be proving the nature of the services the broker promises the investor and the trust and confidence reposed in the broker by the investor. It’s time to get rid of frivolous arguments that a broker is not a fiduciary when the brokers are holding themselves out as trusted, professional advisers and encouraging their clients to trust and rely on their professional advice.”
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys have extensive experience in representing investors in securities matters. For further information, please contact us.