On the fiduciary rule

WWB strongly supports this position.

Regulations that facilitate conflicts and transacting under an overly complex body of regulation combined with poor but legalesed disclosure are what caused the problem. Together they enable, effectively, a regulatory safe harbor for operating under false color.  Its not complex... but gets so when regulatory capture holds the day. And that's where we are. 

"I do not believe a broker can act as a fiduciary to an investor seeking advice for his personal investments for one simple reason – he can’t serve two masters. A broker already owes a fiduciary duty to his client. It’s just that his client is not the public that buys his wares; his client is the issuer of securities, companies, municipalities, mutual fund companies and other investment product manufacturers. And frankly, Wall Street is already failing at fulfilling this duty. Any IPO that has a large pop on the first day of trading is a failure of the brokerage underwriter to meet his fiduciary duty to his client. What is needed is more education, not a blurring of the lines between advisers and brokers."

The Fiduciary Rule Educates The Public

LPL Financial No Longer Claiming to Be ‘Conflict Free’

Investors take note. This is a big deal. We've always encouraged investors to read & understand the fine print of advisory & brokerage agreements, particularly disclosure of conflicts. Of course, many have been written in legalese so as to obscure, if not misrepresent, the substance. The fog of advertizing under false color is slowly receding and with significant consequences for conflicted business models. And more will follow.  This from today’s WSJ LPL Financial No Longer Claiming to Be ‘Conflict Free’ .

“LPL Financial Holdings, the Boston-based independent brokerage, is moving to prevent its affiliated financial advisers from claiming they are “conflict free.”

On Monday LPL removed those words from its web site following a story in The Wall Street Journal showing that some advisory firms claim to be “conflict free” on their public websites even though they also list numerous potential conflicts in their disclosures to government regulators.

LPL also asked its advisers to review their websites “for any use of that language and address the concerns that have been raised,” said a spokeswoman for the firm...

LPL’s regulatory filings disclose several conflicts, yet a Journal analysis found that the websites of approximately 70 LPL advisers asserted they were conflict free. As of last week LPL’s own website said the firm’s “objective research” enabled advisers to “provide conflict-free advice and guidance.”

Now one wonders if any of LPL's or its advisors' prior disclosures were misleading? What changed from an operational or policy perspective? One suspects nothing but sunshine. No doubt litigators will sort that one out.

The duty of an advisor vs a broker operating under color of defective & misleading regulation

This is a huge issue, and most investors are unaware of it. It is driven by the best regulation that money can buy... and did.

"many financial professionals who hold themselves out as “trusted advisers” are legally allowed to recommend investments that pay the adviser more while exposing investors to higher costs, greater risks and poorer performance than available alternatives."

The Document You Should Ask Your Advisor to Sign

Update on Monday, December 21, 2015 at 06:42AM by hb

How timely.

J.P. Morgan to Pay $307 Million Over Client ‘Steering’

Update on Wednesday, December 30, 2015 at 07:44AM by hb

Barclays Capital Settles Allegations of Unsuitable Mutual-Fund Switches

"Barclays Capital Inc., a unit of British bank Barclays PLC, will pay $13.75 million in fines and restitution to settle allegations that its former U.S. wealth and investment-management unit failed to prevent thousands of unsuitable mutual-fund switches in customer accounts "

WWB comments on DoL's Proposed Conflict of Interest Rule

Watson Wilkins & Brown, LLC, submitted formal comments to the Department of Labor on it's Proposed Conflict of Interest Rule.

Although the formal comment period is formally closed, we understand DoL is still accepting comments. We wanted to submit the comments by email, but after 5 phone calls to various offices in the Office of Regulations and Interpretations... well, we snail mailed it.

And that, my friends, is part of the problem.

Update on Monday, August 17, 2015 at 10:50AM by hb

WWB's comments posted on DoL's page here: http://www.dol.gov/ebsa/pdf/1210-AB32-2-02605.pdf

Buyer beware: where is the SEC?

Read this to understand the dynamic of how large scale firms represent, or mis-represent as the case may be, their practices: Brokerages Pull Back on Fee Label  (excerpted below):

The two largest U.S. retail brokerage firms as measured by client assets have told their financial advisers who hold the certified financial planner designation to not promote their businesses as "fee only."

The directives followed reports that hundreds of brokers were inaccurately describing themselves as fee-only on an industry standards group's website.

Under rules that the Certified Financial Planner Board of Standards Inc. recently clarified, advisers who have the CFP designation and work for brokerages whose business includes commissions cannot call themselves fee only. 

 Last week, Financial Planning magazine and The Wall Street Journal reported that hundreds of them, from firms including Morgan Stanley, MS +0.89% Wells Fargo & Co WFC +0.44%, Bank of America Corp. BAC +0.72% and UBS AG,UBS +1.54% among others, were doing just that on the board's website...

The classifications as "fee only" occurred on the website of the Certified Financial Planner Board, and the Certified Financial Planner Board of Standards are such that "fee only" is appropriately used only when all the advisor's compensation including that of any related parties come from client fees. The standards are very clear.

The website is regularly used by consumers who are looking for "fee only" advisors as opposed to those who take receive sales commissions or other emoluments from providers or distributors of investment products.

.

So it appears we have major firms constructively and widely misrepresenting their compensation practices in public advertizing. Is this what people used to call fraud? 

Update on Monday, October 7, 2013 at 08:59AM by hb

The business model called to mind a seperate, but related story earlier in September. Wells Fargo Hires $1B Morgan Stanley Broker Team - "They previously managed more than $1 billion in client assets and their annual production in fees and commission was roughly $5.8 million, according to Wells Fargo." We invite the reader to comptemplate what impact fees and commissions of $5.8mm might have on specific product recommendations.