Whose Side is Your Broker/Agent On?

The financial services industry has been debating the fiduciary standard for investors with no solution in sight. Investors should be wondering why this is such a difficult issue. Shouldn’t the interest of the client always come first? Why is Wall Street fighting the fiduciary standard?

Ben Bernanke (lower-right), Chairman of the Fe...
Ben Bernanke (lower-right), Chairman of the Federal Reserve Board of Governors, at a House Financial Services Committee hearing on February 10, 2009. (Photo credit: Wikipedia)


When I started in the financial services industry in 1992, yes it’s been 20 years, I was given what was considered the best training in the industry. What they do no tell you is that the training was exclusively focused on selling.  There was very little training on what was best for the client only what sold best at the time. During times like now, when safety was the top issue, we were taught sell bonds, annuities, gold, CDs etc. When times were good and optimism was everywhere sell growth stocks funds.


There was a product for every situation. The main goal of the brokerage and insurance industries is to maintain sales, not necessarily recommend what is best for the client. Contrary to what most people believe successful stock brokers do not make their wealth trading stock. Their wealth is generated from commissions and fees. Whether you make money or not is irrelevant.


This went against everything I learned in finance classes in undergraduate and graduate school. When I asked why we didn’t use the processes recommended and proven by academia. I was told academia did not apply in the real world. Despite the fact that academia proved stock picking and market timing did not work.


I, like a good employee, did as I was told. It was the 1990’s times were great so I looked for the best stocks to make as much money as I could for my clients. This was a huge mistake on my part. I was devastated when I had to tell a client that the stock I recommended failed and they lost a good portion of their money. Of course, I bought the same stock and was hugely disappointed as well.


I knew there was a better way. The academics were right. No one can consistently predict the future. The markets are far too efficient to predict what will happen next.

Getting rich quick is a matter of luck and not skill.


To succeed in investing you must think long term, develop a prudent process and finally remain disciplined.


A fiduciary adviser will follow three simple rules,

own equities……globally diversify……rebalance.

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