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Investing and the fiduciary standard

By Sheyna Steiner ·
Wednesday, September 8, 2010
Posted: 11 am ET

There's been an ongoing debate on the role of the fiduciary standard in the financial services industry. On the one hand, consumers have a responsibility to research their investing options. On the other hand, that's often why consumers seek investing advice in the first place.

Unfortunately for consumers, sometimes the people who benefit the most from certain investment products are the same ones giving advice. And that leads to a conflict of interests, usually with the individual investor on the losing side.

Registered investment advisers are held to the fiduciary standard, which means they must put their client's interests before their own. Brokers are held to the less stringent suitability standard which requires that clients confirm that their investing goals, income and risk tolerance are suitable for the investments they are buying.

The recently enacted Dodd-Frank Act gave the SEC the authority to enact a universal fiduciary standard across the financial services industry if the agency found cause to do so. The SEC took comments on the issue through August.

According to Alex Leondis, reporting for, opposition to the proposed standard was most vehement from dual-registered insurance agents.

In a story titled, "Insurance agents oppose fiduciary standard in comments to SEC," Leondis reports that the insurance industry may be reluctant to disclose conflicts of interest when dealing with clients. Some products sold by the insurance industry, variable annuities, are often criticized for their hidden fees and confusing compensation structure.

Have you ever been taken advantage of by a finance professional and would a universal fiduciary standard be appropriate?

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September 08, 2010 at 2:46 pm

Actually, Suze is an industry joke. Those that can't teach...

Sheyna Steiner
September 08, 2010 at 1:32 pm

I'm not convinced that the media is a bigger problem. Possibly I'm biased.

There is a need for greater financial literacy in the country and Suze Orman has enterprisingly stepped up, for good or bad, I have no idea.

Honestly, I'm not too familiar with her advice but I know she really annoys some investment advisors. Two people I interviewed recently cited her specifically as advice to avoid. Which is understandable, it's hard to take general advice and make it specific to your situation.

However, I think it might be a little bit of sour grapes in some cases in that some investment professionals may only wish that they had thought of her shtick first.

September 08, 2010 at 1:09 pm

I wish the Act would extentd to the media as well. They are a larger problem than insurance agents. Ormanesque financial advice is problematic. That is why she dropped her she is now under media domain and has no fiduciary reqirements.

They should at least require a disclosure underneath their articles.