April 12, 2012
Most investors, conditioned by heavy advertising, have clear
expectations that their financial advisor is serving their best
interest. That is also partly due to the failure of regulators to rein
in the creative use of job titles. Hundreds of thousands of sales
professionals who used to be known as insurance agents and stock brokers
now use titles that are meant to imply "trust me." While many of the
newly minted advisors are serious about living up to their adopted
titles in both name and substance, there is enough of the sales culture
still embedded in the industry to add to the public distrust associated
with Wall Street.
As it so happens, there is a precedent on the broker side for a
fiduciary standard that has, until recently, not been examined closely.
The SEC should welcome the findings in a newly published study by
professors at Texas Tech University and Roger Williams University
that looks not at cost projections, but at the real world impact today
under existing state common-law standards. A common-law fiduciary
standard is the body of law, developed over decades by the courts, not
regulators or Congress.