Letter to New York Times
The CFA Asset Manager Code of Professional Conduct outlines the ethical and professional responsibilities of firms that manage assets on behalf of clients.
What is needed today is an individual investor Bill of Rights that puts forth the expectations of the individual investor with regard to the financial advisor responsible for managing in many cases the life savings of that investor.
On April 8, 2016, the United States Department of Labor released a long awaited fiduciary rule, fully effective January 1, 2018 imposing higher standards on financial advisors. The rule forbids the use of certain investments including annuities, managed account programs and other products within retirement accounts.
More important to the individual investor are the conspicuous loopholes in the rule.
The fiduciary rule: Does not address recommendations made in non-retirement accounts and includes a critical exemption that allows the use of products forbidden in retirement accounts if the client signs a best interest contract.
The fiduciary rule is a boon to class action attorneys and retirement plan sponsors desperate to stem the ever increasing tide of employer sponsored retirement accounts being rolled over into IRA accounts as employees retire.
What the fiduciary rule does not do is protect the individual investor from the irreparable harm that comes from unregulated advice given by advisors motivated by lack of knowledge or greed.
It may come as a surprise that the well-known phrase “first do no harm” is not in the Hippocratic Oath taken by the physician responsible for your physical well-being. Neither is it in any oath taken by the person relied upon to protect your financial well-being, your financial advisor.
In a profession where admission is contingent upon passing a multiple choice exam, buyer beware has unfortunately become the individual investors most important protection, DOL rules notwithstanding.