Tag Archives: Stock brokers and their prey

Here’s a change for the better

The WSJ reports that one of the changes Obama is seeking to impose on Wall Street is increasing the standard of care stock brokers owe their customers from the “suitability” standard to a “fiduciary” one. Right now, a broker’s only obligation when giving you investment advice is to refrain from making recommendations unsuitable for you given your age, income, net worth and financial sophistication. In practice, that means  brokers can sell you anything they like because, in Wall Street’s morality, if you were smart enough to accumulate something worth stealing, you’re financially sophisticated enough to have realized that your broker was pitching dog doo.

A fiduciary or trustee relationship would require the broker to only consider your best interests and bar him (or her – some of the worst crooks I hunted in the canyons were woman – ask me about Linda Schwartz some day) from pitching the latest Merrill Lynch -“Guaranteed to lose but it sure pays huge commissions” fund.

This change would have a huge effect on brokers’ earnings and liability so naturally, the firms are fighting back. It seems likely that Obama will lose this fight or the bill will be so watered down as to be worthless, but I give him credit for trying.


Filed under Uncategorized