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January 24, 2012

Should there be different standards for brokers and advisers?

This issue has been around for a long time. ” Brokers must recommend ‘suitable’ products, not necessarily best or cheapest’.”  “Advisers must put client’s interest before their own.”
Most investors do not understand the difference in the the various players in the “financial” field or the different standards they are held to.  Years ago, this was confirmed by a Rand study.  Things got more confusing when the “Merrill” rule was adopted.  Some regulators and consumer advocates have been trying to have all players (some are currently exempt such as those that are regulated by the states).
When discussing this issue, people usually tell me their broker does put their interest first.  Most brokers I talk to tell me they put their clients’ interest first.  Some even mention that they do not always sell the products with the highest commissions.  It sounds as if everyone agrees that the clients interest should come first.  If this is true why is their such a strong opposition to adopting one standard, putting  the clients’ interest first?  

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