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How to Tell a Salesman From an Advisor / Broker

The fastest growing channel in financial services these days are those advisors/brokers who operate both as registered investment advisors and as affiliates of licensed broker-dealers.

Advisors/brokers who are dually registered may (in theory) sell both fee-based advice and commission-based products.

This conflict has brought renewed attention to the ‘fiduciary’ standard as compared to the standard of ‘fair dealing with customers.’ However, as the SEC admonishes newly-registered Investment Advisors that “As investment advisers/brokers you are a fiduciary to your advisory clients and must provide investment advice in your clients’ best interests.”

The inherent conflict in the requirements of a fiduciary and the sales related compensation may provide the needed fodder to convince a Judge or an arbitration/mediation panel that the conduct of the advisor/broker violated both the spirit and the letter of the law.

However, as dually registered Advisors, it may not be possible to avoid self-dealing. The securities salesmen, who now are re-cast as financial planners, may find that they are not used to the work of actual financial planning for their clients, and of maintaining and changing recommended portfolio allocations. Active management may require that “hands on” management including monitoring of client portfolios and management, and acquiring software appropriate to the discretionary and supervisory authority necessary to comply with loss management requirements of more risk-adverse clients.

However, under Dodd-Frank legislation, the fiduciary standard for advisors/brokers may finally be implemented across all financial services professionals.

But, as far as retail customers are concerned, it should not matter what the advisor/broker calls himself or herself. When your financial advisor/broker breaches his duty of undivided loyalty and prudence, no matter how the ‘salesman’ is compensated, that person is properly called a ‘Salesman.’

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From its offices in Connecticut and Florida, the Law Offices of Howard M. Rosenfield has been representing investors nationwide in securities arbitrations and mediations for over 30 years. Please call now, toll free, for more information if you believe that you suffered an investment loss: (860) 677-4334.

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