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Where SIFMA and I Are In Total Agreement

I routinely hear from brokers affiliated with the brokerage firms, and their messages usually convey a certain degree of hostility.  Why (they will ask) am I prejudiced against wirehouse brokers when the majority of them (they will tell me) are client-focused good guys (yes, they use that term) who put the customer’s interests first.  Why do I insist on calling them sales agents when they have the CFP designation and sell advice rather than products?

Why do I say that journalists should always refer to them as brokers, so long as they’re employed by one of the brokerage firms, when they prefer to be called “advisors.”

Brokers, I’m sorry to tell you this, but your own companies are on my side on this one.  The Securities Industry and Financial Markets Association (SIFMA)—which calls itself “the voice of the U.S. securities industry” and whose membership is the brokerage firms—is challenging the DOL Fiduciary rule, in an effort not to have to live up to fiduciary standards.

But here’s the point: SIFMA’s attorneys are basing their legal challenge on the argument that the U.S. Department of Labor has inappropriately extended the fiduciary standard to “activities that have never been understood to entail fiduciary duties, such as recommending the purchase of an investment product.”  (In case you were confused, this means sales activities.)

A fiduciary duty, they further argue, “only applies where a heightened relationship of trust and confidence exists.”  It should not apply to the brokers who work for SIFMA members, because they are salespeople engaged in activities that “involve nothing more than suggesting and selling a financial product.”  The legal filings, as detailed in a white paper issued by the Consumer Federation of America (you can find it here:; see pages 4 and 13-14 especially) refer to “commercial sales relationships,” and argue that their reps cannot reasonably be viewed (or regulated) as advisors, since they do not actually provide unbiased advice.  Instead they are engaging in activity “whose essence is sales.”  The filings state that “It has long been the law… that a difference exists between sales activity and fiduciary activity—which occurs only under certain circumstances arising out of a special relationship marked by trust and confidence between the parties.”

So please don’t climb all over me when I describe you as a salesperson.  Your employer, and your employer’s trade association, have told a federal judge that that’s exactly what you are.   Don’t fault me for saying that your relationship is not based on the trust and confidence that your customers would give to a real professional.  Rather than providing unbiased advice, the essence of your services are sales.  Don’t give me a hard time; take it up with your own employer. 

If you don’t like what the filing says about you (and I wouldn’t if I were in your shoes) there seems to me to be two options.

1) Petition your firm to change its stance on the DOL fiduciary rule.  Tell them to embrace (rather than fight) the fiduciary standard that puts you where you say you are: on the same side of the table with the client.  While you’re at it, petition your firm to allow you to register as a Registered Investment Advisor, since that’s the role you say you play.  Or:

2) Leave the sales culture and become an independent advisor/financial planner/wealth manager, register with the SEC, and come back and tell me never to call you a sales agent again.

Of course, most brokers won’t follow either of these routes; they’ll continue to demand that I stop saying they live and work in a sales culture.  I suspect that most of these brokers mean well, and try to work within their system to provide value to their clients.  The problem is that this is not what they’re hired to do.  When I reply to their hostility, it will be nice to be able to point out that their firm is totally on my side of the argument.