Majority of Investors Think Brokers are Fiduciaries

A study has shown that three out of four investors think that “financial advisers” at major brokerage firms are fiduciaries, requiring them to put their client’s interest first. Instead, “financial adviser” is simply a term used by many large firms such as Bank of America’s Merrill Lynch to describe their retail sales people. Brokers are required to make only “suitable” recommendations to their clients based upon their investment objectives, tolerance for risk, age, sophistication, employment status, financial needs and time horizon. On the other hand, most registered investment advisers have an obligation to place the customer’s interest first, abiding by the fiduciary standard. Under the Dodd-Frank financial reform law, the SEC is to submit a report in January 2011 to Congress on investor protection. The SEC will then be authorized to establish a universal fiduciary standard of care covering everyone who provides personalized investment advice, including brokers, investment advisers, financial planners and insurance agents selling annuities. With the aging of America, the growing numbers of older people expect financial professionals to put their client’s interest ahead of their own when giving investment advice, since they have a limited time horizon to recover any losses they incur.

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