Buried in President Obama’s proposed regulatory overhaul is a change that could upend Wall Street: Brokers would be held to a higher “fiduciary” standard that would compel them to place their client’s interests ahead of their own.
Currently, brokers are only required to offer investments that are “suitable,” which means they can’t put clients in inappropriate investments, such as a highly risky stock for an 80-year-old grandmother. The move could change the way products are sold and marketed and even how brokers are compensated.
This will be a sea change for the brokerage industry who will be forced to be held to the same standard as Investment Advisors if this legislations gets past.
Read more on what the difference is between a broker and an investment advisor.
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