How to Tell an Advisor From a Salesman

The fastest growing channel in financial services these days are those advisors who operate both as registered investment advisors and as affiliates of licensed broker-dealers. Advisors 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 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 panel that the conduct of the advisor 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 may finally be implemented across all financial services professionals,.

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

For more information about how to recover your assets from investment fraud by a financial advisor or brokerage firm, contact Attorney Howard Rosenfield at (860) 677-4334 or email howardrosenfield@stockbrokerproblems.com. Attorney Rosenfield is also available to speak on specific subject matter topics related to investment fraud.