House Scraps Commissioned Based Advisors Fiduciary Standard of Care

Here is a direct quote from Barney Frank (D) Chair of the House Financial Committee, after approving the new financial regulation bill.

Barney Frank last week added a limitation to the extension of the fiduciary duty. In particular, the provision that would require the SEC to adopt rules applying a fiduciary standard of care to broker-dealers now states: "Nothing in this section shall require a broker or dealer or registered representative to have a continuing duty of care or loyalty to the customer after providing personalized investment advice about securities."

In essence, any stock broker, commissioned-based financial advisor, registered representative or dealer will not be required to the same duty of care as a independent Registered Investment Advisor (RIA). Therefore, once a financial product is sold or recommended these representatives are not required to uphold the same duty of care as the RIA.

In my humble option, why would any investor (unless its a discount broker and the investors is managing their own portfolio of investments) hirer an advisor that is not an independent RIA. The biggest problem I see with the decision is that the everyday investors has no idea the real difference between an independent Registered Investment Advisor and a commissioned-based broker dealer. If this provision would have passed the house financial committee it would have create an equal playing field that would benefit investors seeking investment advice.

I encourage anyone who is seeking professional investment advice to understand these important differences before they hire an investment professional.

By David A. Mascio