Do you think that physicians’ advice should be based on their patients’ best interests? How about lawyers? Plumbers? Financial brokers?
An advisor who has what is termed a fiduciary duty is required to use the best interest standard with his client. For example, an attorney is prohibited from recommending that his client proceed to trial, which would be beneficial financially to the lawyer, if the attorney believes that a settlement serves his client’s interest better. While it may not always work this way in the real world, this is how it is supposed to happen.
Shockingly, investment brokers, unlike certified financial planners, have no fiduciary responsibility when advising clients on their personal investments. They are free to make financial recommendations that are “suitable” for a client, even if this would not be in the client’s best interest. The broker can consider his own financial interest, which clearly may conflict with his client’s welfare, without violating any professional standards.
I wonder how many clients of brokers are aware of this scam? The Security and Exchange Commission now has this legalized lapse under review and is expected to issue a regulation later this year, hopefully, raising brokers’ standards to what they should have been all along.
Imagine if all of society operated under these loose rules.
Broker standard: Looks like you need a new fixture.
Fiduciary: Looks like you need a new light bulb.
Broker standard: The transmission needs to be replaced.
Fiduciary: I think a new spark plug should do it.
Broker Standard: New in town? Let me show you the sights on our way to your hotel.
Fiduciary: Hop in. We’re only 5 minutes away.
Broker standard: I think a gastric bypass makes the most sense here.
Fiduciary: I’ve arranged for you to meet with our dietician.
Relax, my patients. Physicians are fiduciaries and are obligated to consider only your best interest, not ours, when we are offering you medical advice. Even if we weren’t true fiduciaries, I’d like to think we’d do the right thing anyway.
Michael Kirsch is a gastroenterologist who blogs at MD Whistleblower.