RIA Issues and Fiduciary Standards

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 can (in theory) sell both fee-based advice and commission-based products. However as the SEC on its website admonishes newly-registered Investment Advisors that “As an investment adviser, you are a fiduciary to your advisory clients. This means that you have a fundamental obligation to act in the best interests of your clients and to 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 combat the “it’s the market downturn” performance argument to convince a Judge or an arbitration panel that the conduct of the advisor violated the spirit and the letter of the law.

As dually registered Advisor, it may not be possible to avoid self-dealing. The securities salesmen who decide that they could use the additional income stream that might come from their firm’s receipt of an asset based management fee, 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 at least weekly 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-averse clients.

However, fiduciary standards for advisors may be made across all financial services professionals, although this is an issue that is continually “studied” and revisited by the SEC.

No matter what the advisor calls him or herself, you should be able to show that the fiduciary breached his duty of undivided loyalty and prudence, if he is claiming he is a financial planner, and gets most of his compensation as a result of sales. That person is properly called a salesman.

Client Reviews
★★★★★
Howard Rosenfield is truly a life saver. After months of working with my financial advisor, I found out he was making risky investments without my knowledge. When I discovered how much money I lost, I thought there was nothing I could do. Howard explained all the difficult terms and what exactly my financial advisor did wrong. If it wasn't for Howard, I would never have recovered my losses and would be under extreme financial distress to this day. J.
★★★★★
Howard’s experience and advice throughout this ordeal was invaluable and reassuring. The law in general is complicated, difficult to understand and very personal. Financial misappropriation is even more personal but Howard’s years of experience and calm demeanor helped keep me calm, focused and moving forward. For anyone in need of a knowledgeable and experienced Investment Recovery Attorney I strongly recommend Howard. Laura
★★★★★
I was filled with anxiety and stress when I selected Attorney Howard Rosenfield to represent me. Instantaneously, I felt comfortable and at ease. Attorney Rosenfield listens attentively to the facts and asks questions and competently reiterates and verifies the accuracy and completeness of my statements. Perseverance, trustworthy and superb legal and communication skills mark Attorney Rosenfield to be one of the best in his field of law. Helen