One Way to Solve the Fiduciary Debate: Truth in Advertising

the reality is that when advisors and salespeople are clearly labeled as such, consumers actually can understand the difference. We intuitively understand that the advice of a doctor or lawyer is different than the fashion “advice” of the salesperson in a clothing store or the nutritional "advice" of the person behind the counter in a butcher shop. And in fact, subjecting salespeople to an advice standard can create more problems than it solves, whether it’s making butchers become Registered Dieticians, or turning brokers into fiduciaries while they are supposed to still fulfill their actual role as brokers.

Accordingly, perhaps the better solution to the blurring of the distinction between investment advisers and brokers is not to subject them all to a single uniform fiduciary standard as "financial advisors", but instead to simply re-assert the dividing line between them. Let advisors be [investment] advisers (subject to the fiduciary rule that already exists), brokers be brokers, and rather than mixing the two let each hold out as such to the public - where brokers are called brokers and investment advisers are called investment advisers - so consumers understand the true choice being presented to them. In other words, consumers don't deserve a choice between fiduciary and suitability; they deserve a choice between advisers and salespeople.

Michael Kitces may be on to something here – let brokers who are in the business of selling investment products with only incidental advice go back to labeling themselves as brokers, and not “investment consultants” or “financial advisors” or “private wealth managers” or whatever other names are causing so much confusion for the public.

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