We don’t let pharmaceutical reps hold themselves out as doctors to the public for the same reason that we must stop letting product sales companies and employees market themselves as financial advisers. Society and taxpayers cannot afford for this to continue.
The need to put income and title separation between product sellers (paid by companies) and fiduciary advisers (paid by clients looking for impartial financial advice) has been obvious since the financial crash of 1929 and Depression that it ignited. The same point has been painfully reaffirmed over the last 30 years of recurring financial devastation since Glass Steagall divisions were relaxed in the late ’80’s and repealed outright in 1999.
Fiduciary advocates are once more urging the US Securities and Exchange Commission (SEC) to put critical divisions back in the system via the use of titles. It’s a foundational part of the road to increased financial stability. See Fiduciary groups urge SEC to prevent brokers from using ‘adviser’ title:
When brokers hold themselves out as a “financial adviser” or “wealth manager” and when they advertise that they provide financial advice, it misleads investors, the committee said.
“[W]e recommend that the Commission require that any title they use clearly denote their role as salespersons,” the committee letter states. “Titles can range from ‘salesperson’ to ‘broker’ but may not include terms that suggest a level of advice beyond that of stimulating the sale of a product.”
Investment advisers, who must register with the SEC, are held to a fiduciary standard that requires them to act in the best interests of their clients.
Brokers, who register with the Financial Industry Regulatory Authority Inc., are held to a suitability standard that requires them to sell products that meet an investor’s objective and risk tolerance. But the standard also allows brokers to recommend investments that produce the highest revenue for the broker as long as the other elements of the standard are met.
The distinction can be lost on consumers, especially as brokers increasingly market themselves as providing holistic wealth management services.
“If you call yourself an adviser, then you should be fiduciary all the way,” said Kate McBride, a member of the steering group of the Committee for the Fiduciary Standard.