Independent Advisor Alliance taps LPL project manager for new COO spot

Elizabeth: This sort of hyperbole is the worst sort of advocacy – not reporting at all. “Broker-dealers thrive on speed and risk-taking; caution and disclosure lie at the heart of the fiduciary standard under which investment advisers operate.” The truth of the matter is that the investment process of most RIAs and most brokers is identical except that one sells a product and one sells a recommendation of a manager. Good advisory processes have nothing to do with whether an advisor is a fiduciary or not. If you read the real definition under common law, RIAs for the most part do not meet the behavioral standards required of a beneficiary.
The worst part of this internecine battle is that it will eventually result in turning clients off. They can’t differntiate, and will wind up saying a pox on both types of advisors and go entirely self-service.

Good point. I was sweeping in my generalizations. What is the reason, in your view, that broker-dealers have resisted the fiduciary standard until recently?

Elizabeth, Wall Street, to its credit, understands the advice business is fundamentally different than the commission sales business. They have been brillant in protecting the broker anf their firms from fiduciary liability. Simply put in the language of major wirehouses, brokers are not acting as advisors, they do not render advice as it is a violation of the internal compliance protocol of their firm. Any advice rendered is incidental the trade execution services provided. The SIFMA membership maintains that brokers simply make the consumer aware aware of their investment alternatives, it is up to the consumer to determine investment merit on their own, regardless how linited their investment knowledge and experience may be. This is why it is a violation of the internal compliance protocol of every brokerage firm for brokers to acknowledge their fiduciary oblighation to act in the consumer’s best interest. Thus, I respectfully disagree with the equivalency arguement as brokers and advisors are significantly different. It should not be a pox on both houses (brokers and advisors), only those houses that do not support fiduciary standing. The SIFMA may try fake it by creating a new fiduciary standard of its like to no avail because enterprising advisors will point out the conflicts of interests and the specific fiduciary duties which are not being met by brokers. Half measures do not work. With out the major firms on Wall Street taking the difficult steps to support fiduciary standing—the trust and confidence of the investing public can not be restored.

I think this argument “They can’t differntiate, and will wind up saying a pox on both types of advisors and go entirely self-service” is a ridiculous argument. Why can’t consumers differentiate? Because Wall Street has worked hard to obscure the difference. As Mr. Winks points out there are significant differences.

As for this, “The truth of the matter is that the investment process of most RIAs and most brokers is identical except that one sells a product and one sells a recommendation of a manager,” if that is what you believe distinguishes RIA’s, or describes what they do that makes them RIA’s, then I suggest you look more closely at what is going on.

The article may have been too sweeping, I have worked on both sides, but it is essentially true.