Posted by: Lauren Young on April 12, 2007
Last week many of the independent financial advisers I speak to were jumping for joy at a decision by the U.S. Court of Appeals for the District of Columbia Circuit. That court vacated a controversial SEC rule which exempted fee-based brokerage programs from the Investment Advisers Act of 1940.
“Today is a historic day for the advancement of the financial planning profession,” said Financial Planning Association President Nicholas A. Nicolette, CFP, who called the ruling a victory for consumers. “This rule should have died a quick and merciful death a long time ago.”
If the ruling stands, it means that broker-dealers will not be able to avoid the fiduciary standard of care when giving advice for a fee, something the “Merrill Rule” has allowed until now. “And, as you may know, the brokerage lobby behind the Merrill Rule is HUGE by comparison to the 60,000 to 70,000 or so investment advisors,” says James Stehr, a financial adviser in Alameda, Calif.
What do you think? Should advisers who work for a brokerage house be required to put their clients’ interests first?