Fiduciary Rules for Stockbrokers (Another take)

February 5, 2011

Chuck Jaffe from MarketWatch has a similar take on debate I referred to in this post. Mr. Jaffe’s article acknowledges that:

For most investors, the difference between an “investment adviser” and “broker” is semantic. Both give investment advice, selling either specific investments or advice on how to structure a portfolio.

And observes that:

In the end, the fund industry can create endless share classes to find new ways to serve investors and advisers. There are already several big fund firms with a dozen or more share classes, each with fine-line distinctions from the next.

“If the fiduciary rules hold true, one would hope we’d see fewer share classes, because the [brokers and planners] should be in less of a position to extract additional compensation out of the client,” said Geoff Bobroff, an industry consultant in East Greenwich, R.I. “There’s been some improvement — like the trend away from B and C shares — but there’s also the potential for fund companies to create a lot of new share classes to deal with this.”

Mr. Jaffe makes a good point.  But imposing a fiduciary standard on brokers, although possibly confusing, is a positive step for investors.


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