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Why a reputation of shadiness persists in the financial advisory industry

Quite literally the truth never sees the full light of day -- and clients and quality advisors pay a price for it

Author Guest Columnist Jack Waymire September 30, 2013 at 5:15 PM
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Jack Waymire: Advisors still have to win to make money. Most advisors do what it takes to win.

RIA Compliance

fiduciary Advisor Advocate

fiduciary Advisor Advocate

October 1, 2013 — 4:30 PM

This is not shocking but it is sad. I wonder how some of these advisers would feel next time they go to the Doctor with some ailment and the Doctor decides there is no need for he/she to follow protocol, disclose potential negative interaction of medications…but heartedly gives the adviser/patient a slap on the back and a lollipop!

Knut Rostad

Knut Rostad

October 1, 2013 — 4:34 PM


You have made some important points about the lack of transparency and documentation among fiduciary advisors and the challenges investors face getting through the jungle of often hard to fathom or happy sounding sales talk. You could have underscored the damage to the profession from these practices by also suggesting the harm to our reputation when these practices lead to bad experiences. Many advisors appear to believe that when the public views “Wall Street” as akin to a foreign entity that does not share our values, this does not matter to RIAs. (A report last month by the American Enterprise Institute essentially drew this conclusion, It can be found on the Institute for the Fiduciary Standard website, http://www.thefiduciaryinstitute.org/fiduciary-september/fiduciary-september-2013). This view that RIAs are separate and apart from Wall Street in the public mind is mistaken. We are all tarnished.

I will differ with your conclusion that the problem is the fiduciary standard for advisors is “flawed.” The standard is not that which is flawed. The 40 Act standard is actually quite good.
In honor of Fiduciary September 2013, the Institute published a short paper, “Six Core Fiduciary Duties for Financial Advisors.” The paper outlines what we believe are the key elements of fiduciary conduct. In essence, I suggest adhering to these duties is no walk in the park. The paper is available on our website:

The “flaw” is enforcement by either government regulators or the profession itself. Enforcement that results in actual adherence to the standard. And what better time (than on the first day of a government shutdown) to suggest it will be the profession and the market place and not the regulators who make the fiduciary standard real to millions of investors.


Jack Waymire

Jack Waymire

October 4, 2013 — 6:35 PM

Hi Knut:

I absolutely agree that enforcement is a weak link. And as more and more reps become IARs the weakness becomes a bigger risk for investors. They do not have a process for determining the quality of financial advisors. They tend to buy the best sales pitch. That creates an opportunity for IARs whose primary skill is sales. And, since their pitches are verbal there is no record of their pitch or claims. Verbal also opens the door to abuse: Omission, Misrepresentation, and Exaggeration. A fiduciary standard for stockbrokers is half the battle. The other half is documentation. The ultimate form of “transparency” is what advisors are willing to document.

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