For all those relying on the much marketed “expertise” of their investment brokers/advisers, here is an illuminating story: the Financial Industry Regulatory Authority is considering restricting the ability of brokers to sell a product if they cannot explain its risks to potential investors. Bet you thought understanding a product before advisers recommended it to clients was already a given…well apparently not, see: In soured investments, brokers emerge as culprits and victims.
“For years, regulators have typically pursued brokerage firms over the failure of investments they sold rather than going after individual stockbrokers, because the target was larger and the possibility of reaching a financial settlement was greater.
Now, regulators are shifting their focus in their fight against fraud to encompass brokers. The shift comes even as some brokers are casting themselves as victims, saying they were duped by the same complex products that they once happily sold to customers.
Brokerage firms project a public face of their employees as attentive, diligent and proficient. In television and Internet marketing, they highlight the expertise and sound guidance of their advisers. In contrast to that depiction, brokers are now saying that some products were so complicated that they did not have the knowledge to sell them. Some have sought to have complaints about the products they sold expunged, and others have filed claims against their firms.”
In a world focused on sales and upfront payouts, no one wants to be held accountable for outcomes.