The Obama administration has proposed holding the broker/dealer community to a stricter standard than ever before and the brokerage community is furious about it. What is the brokerage community so upset about? What is it that has brokerage firms spending millions of dollars in a battle against the proposal? What sort of egregious proposal did the Obama administration propose that has brokers so enraged?
The Obama administration is proposing that brokers act "in their clients' best interest."
Oh horrors of horrors.
A recent Wall Street Journal article details the inevitable move by brokers towards accepting fiduciary duty when making recommendations to clients. For 70 years, money managers have accepted fiduciary duty regarding their clients. Brokers simply sold securities that clients and money managers wanted. Nowadays, brokers offer themselves out as "financial managers," "investment counselors," and "financial advisors." In their scramble to become more than securities transactors, brokers have crossed the line into money management...and with that ability will come extra responsibility.
As investment advisors, we welcome the additional requirement. A person or firm which provides investment advice should provide that advice in light of a client's best interests, period. Doctors do it, attorneys do it, money managers do it, and brokers will soon do it too if the Obama administration has its way.