Executive Summary
With 2015 shaping up to be a potentially significant year for fiduciary regulation, recent comments by SEC chairwoman Mary Jo White suggests the SEC will soon begin to consider how to draft rules that could subject broker-dealers to a similar fiduciary standard as the one that applies to investment advisers. Most likely, this would occur by creating a “uniform fiduciary standard” that would apply equally to both groups, given that the lines between the two types of “financial advisors” have blurred to the point that consumers no longer understand the differences.
Yet the reality is that when advisors and salespeople are clearly labeled as such, consumers actually can understand the difference. We intuitively understand that the advice of a doctor or lawyer is different than the fashion “advice” of the salesperson in a clothing store or the nutritional "advice" of the person behind the counter in a butcher shop. And in fact, subjecting salespeople to an advice standard can create more problems than it solves, whether it’s making butchers become Registered Dieticians, or turning brokers into fiduciaries while they are supposed to still fulfill their actual role as brokers.
Accordingly, perhaps the better solution to the blurring of the distinction between investment advisers and brokers is not to subject them all to a single uniform fiduciary standard as "financial advisors", but instead to simply re-assert the dividing line between them. Let advisors be [investment] advisers (subject to the fiduciary rule that already exists), brokers be the salespeople they legally are, and rather than mixing the two let each hold out as such to the public - where brokerage salespeople are called brokers and investment advisers are called financial advisers - so consumers understand the true choice being presented to them. In other words, consumers don't deserve a choice between fiduciary and suitability; they deserve a choice between advisers and salespeople.
And notably, the rules already exist to create such a separation, under the Investment Advisers Act of 1940. Which means if the SEC merely enforced the existing rules as written, where any advice that is beyond being “solely incidental” to brokerage services would require investment adviser registration anyway, we could resolve today’s consumer confusion about financial advisors… without writing any new laws at all!
Confusing Advisor Titles And A Potential Uniform Fiduciary Standard
The Investment Advisers Act of 1940 (“the ’40 Act”) was intended to make a distinction between investment advisers who provided (ongoing) investment advice, and broker-dealers that were in the business of selling securities. Under the legislation, those who were in the business of providing investment advice for compensation were investment advisers, and registered representatives of broker-dealers were only exempt from registering as an investment adviser if any advice they provided was solely incidental to their business as a broker (or dealer) and they received no special (i.e., separate) compensation that could be construed as paying for advice services.
Because the two - investment advisers and brokers - were delivering substantively different services, they were also accountable to different (legal) standards. Investment advisers under Section 206 of the ’40 Act were expected not to engage in any acts that could be construed as fraudulent, deceptive, or manipulative – a provision that was ultimately interpreted by the Supreme Court in the case of SEC v. Capital Gains Research Bureau, Inc., to confer a fiduciary duty on such advisers. Alternatively, brokers were held to a simpler suitability standard - a rule designed to regulate salespeople by aiming to limit the sales of unsuitable products.
In the decades, since, though, the dividing lines of practice between registered representatives of broker-dealers and investment advisers has blurred, as brokers increasingly used a consultative (advice-oriented) selling process, and eventually began to fully adopt the comprehensive financial planning process and hold themselves out accordingly as financial advisors. The end result is that while several decades ago, a stockbroker would literally have “stockbroker” on their business card (and likewise an insurance agent would actually be an “insurance agent”), in today’s environment virtually all such advisors hold themselves out to the public the same way, with titles like “financial advisor”, “financial consultant”, “wealth manager”, or outright “financial planner”, regardless of their actual legal and job function.
This blending of the business models, and associated titles, was affirmed by a 2008 RAND study commissioned by the SEC, which indeed found that in the current environment, “investors typically fail to distinguish broker-dealers and investment advisers along the lines that federal regulations define,” and as a result consumers were generally unaware that “advisors” with similar-sounding titles could be subject to substantively different standards regarding the advice they provided and the solutions they recommended.
Accordingly, Section 913 of Dodd-Frank authorized the SEC to further study and consider whether to implement a “uniform fiduciary standard” for all investment advisers and broker-dealers, to eliminate the "gap" in regulatory standards given the substantive similarities of the advice services now being offered by investment advisers and brokers.
Separate Legal Standards For Advisors And Salespeople
The essence of the difference in regulatory standards between investment advisers and broker-dealers is that investment advisers are in the business of advice, and broker-dealers are in the business of selling products. Clearly, those who offer advice should have to act in the best interest of the person receiving advice – otherwise it’s not really advice!? – while those who are in the business of selling products and expected to try to sell their products and have a recognized conflict of interest around any “advice” they give regarding their products (but are generally still expected not to sell something that is just completely inappropriate).
Notably, though, while much has been studied and written about consumer confusion regarding the differences between “fiduciary” and “suitability” standards, when consumers understand the context of the service – advice versus sales – the difference is actually readily apparent. Trusted professionals who give advice, like doctors, attorneys, and accountants, are expected to give us “real” advice to benefit us. And everyone understands that when the sales rep in the clothing store says “that dress/suit really looks good on you” that their “advice” may be colored by the desire to complete a sale. Likewise for the car salesman who says “this is the best car for you” or the waitperson who says “this [more expensive] bottle of wine would really complement your meal better.” Of course, salespeople who really do give good guidance often produce the best (sales) results in the long run, but we all understand that any “advice” they offer should be taken with a grain of salt and is different than consulting a professional advisor.
Notably, even in situations where there is an overlap in the related products – for instance, both my butcher and my nutritionist may give me guidance on what to eat – there is little confusion about the nature of the “advice” from each. The nutritionist is expected to give me advice about what to eat in the interests of improving my health. And we recognize that butcher at least might be recommending the virtues of a particular cut of red meat because he/she happens to be in the business of selling meat.
The Problem With A Uniform Fiduciary Standard Under Dodd-Frank
The fundamental problem of a uniform fiduciary standard can be explained by extending the preceding example. Imagine, for a moment, that butcher shops began to rebrand themselves as “diet centers”, where the butcher was called the “lead dietician” but really only ever recommended the meat for sale in the butcher shop… and suddenly, there was concern that consumers were “trusting” the advice of their butchers too much, and buying (and eating) more red meat than was healthy, failing to recognize that the butcher’s “advice” was really just about selling the meat in his shop (his products) and not necessarily the same as the advice of a bona fide nutritionist.
Accordingly, a “uniform advice standard” is proposed that would require all butchers to become fiduciary diet advisors, go through the educational process to become a Registered Dietician, and that butchers could only offer advice about what to eat after going through a comprehensive analysis of the individual’s health, diet, and family history, to ensure the advice was in the best interests of the buyer.
Now imagine the outcome of this approach. A Registered Dietician is required to complete a bachelor’s degree, so any butcher who didn’t go to college would no longer be allowed to sell meat; in addition, all butchers would also have to complete a national examination, and go through a process of supervised practice to earn their dietician status. It’s not hard to imagine that imposing such requirements would reduce the number of butchers and butcher shops.
In addition, imagine the process of going in to purchase a cut of meat. Even if you know what you want, it’s no longer acceptable to just go up to the counter, chit-chat with the butcher about what’s fresh, and order a piece of meat; now it’s necessary to go through an entire intake and analysis process so the butcher can first conduct his dietician duties and evaluate your health, diet, and family history. You may know what you want to buy, but the butcher can’t sell it to you without going through the process. What should be a 1-minute transaction is now a 30-minute ordeal, with lines out the door, and most people unable to access a butcher in a timely manner even if they wanted (especially since, as previously noted, there will now be fewer of them). And of course, if the butcher has to take 30X as long for each sale of meat, you can imagine the drastic increase in what the butcher will have to charge to purchase a cut.
In a similar manner, organizations like SIFMA lobbying against the uniform fiduciary standard have made the case that a fiduciary standard for brokers could similarly limit consumer access to financial services products, drive up the costs for advisors to deliver services (because they would potentially have to spend more time gathering information from and analyzing each client before making a recommendation), while simultaneously reducing the number of advisors (as not all may be ready/willing to step up to the fiduciary obligation and the competency requirements it may entail). People who simply want to buy a financial services product would have more difficulty doing so, just as those shopping for meat from the butchers with dietician requirements.
To ‘resolve’ this challenge, SIFMA’s proposed (but flawed) solution has been to rewrite the fiduciary standard if a new uniform one is imposed on all investment advisers and broker-dealers, adjusting the new rules in a manner that can reduce the adverse impact to existing business models so consumers don’t lose access to purchasing financial services products and retain a choice of what type of provider to work with. Yet fiduciary advocates have raised a valid concern that rewriting the fiduciary rules could ultimately undermine the fiduciary standard as it exists today under the Investment Advisers Act; unifying through a “new” standard will inevitably end out being a lower standard, as the current fiduciary framework is watered down to the lowest common denominator (undermining the true consumer protections of a fiduciary in the process).
No Uniform Fiduciary Standard, Just Re-Separate Advisors And Salespeople?
While the example above illustrates the fundamental challenge of extending a (uniform) fiduciary standard meant for advisors to the context of product sales, it also indirectly illustrates the solution – which is not to subject butchers and Registered Dieticians to a uniform standard, but simply to limit the butcher from holding out to the public as the lead dietician of a diet center when in fact it’s simply a butcher in a butcher shop!
In other words, both advisors and salespeople serve an important function in society – sometimes, we really do just want to buy a cut of meat and need someone to take our order – and the solution when the distinction gets fuzzy between advisors and salespeople is not to subject them all to a uniform (lowest common denominator) standard, it’s simply to reassert the dividing line between advisors and salespeople so consumers understand the context of the services they are receiving, and let them choose!
Accordingly, the real solution for today’s confusing advisory landscape for consumers is not to require that brokers be subject to a (uniform) fiduciary standard for advisors, but simply for brokers to be required to hold out as brokers and not advisors in the first place. And just as brokers already must acknowledge to clients that they are not tax advisors and should see their accountant for tax advice, they should also be required to disclose that they are not financial advisors and should see a true financial advisor for such advice. In point of fact, New York City Comptroller Scott Stringer has just recently proposed that brokers should be required to disclose to consumers that they are not fiduciaries, though ultimately Stringer misses the point; the real disclosure is not just that the broker isn't acting as a legal fiduciary, but that the broker isn't acting in the capacity of being a financial advisor in the first place, since any advice is still solely incidental to their brokerage services!
Alternatively, if the broker really does continue to act as an advisor and holds out to the public as one, then the broker should be required to register as an [investment] adviser because that is the expectation being created for the consumer! And this is a significant problem in today's environment; as a recent report from the Public Investors Arbitration Bar Association (PIABA) noted, 9 of the largest major brokerage firms are advertising to the public with messages implying they give personalized financial advice as fiduciaries and not clearly communicating that they are primarily in the business of brokerage services.
In point of fact, this delineating between brokers and investment advisers is actually what the Investment Advisers Act of 1940 already requires – brokers whose advice is anything more than “solely incidental” to their brokerage services must register as an investment adviser, and be subject to the fiduciary standard anyway. Which means the real problem is not that brokers aren’t subject to the fiduciary standard, per se, but more simply that brokers are holding out as though they will give personalized investment advice and act like [investment] advisers without being held accountable by the SEC to register as such.
Notably, this also means the “solution” for today's consumer confusion is actually much simpler than rewriting the fiduciary standard into a new uniform one that can apply to both investment advisers and broker dealers and risks being undermined. It’s just a matter of actually enforcing the ’40 Act, as written, including the definitions of “solely incidental” that were a part the final 2005 “Certain Broker-Dealers Deemed Not To Be Investment Advisers” rule which actually stated that delivering financial planning or holding out as a financial planner would trigger the requirement to register as an investment adviser. Were such rules to be re-applied today, all CFP certificants would be forced to become RIA fiduciaries under the Investment Adviser Act of 1940 simply by virtue of holding out as giving personalized financial planning advice!
The bottom line, though, is simply this: the idea of a uniform fiduciary standard is flawed, because it seeks to apply an advice standard for two fundamentally different roles – investment advisers who are compensated for providing investment advice, and brokers who are compensated for the sale and distribution of securities products. The solution is not to resolve consumer confusion between the two by trying to subject them all to a uniform fiduciary standard, while rewriting the fiduciary rules to somehow “preserve choice” for consumers about a range of advisor business models. Instead, the reality is that both advisors and salespeople perform separate and different important services for consumers, and the real choice for consumers should be whether they want to work with an advisor or salesperson in the first place! Accordingly, perhaps it’s simply time for the SEC to enforce the “solely incidental” rule as it is written, and eliminate the consumer confusion by requiring brokers and advisors to be regulated based on how they hold themselves out to the public in the first place, so consumers can clearly understand the choice with which they are presented!
Re-affirming the line that separates advisers from brokers sounds great in theory but brokers have always tried to blur the line with the most despicable going so far as to claim to be “financial planners” while knowing full well you’ll assume that that means they’re a CFP. It’s like hiring a real estate agent to sell your house, whereas you think they work for you but the reality is that technically they work for themselves. Their advice may benefit you but legally it’s ok for it to primarily benefit themselves. Just like a stock broker…. (FYI—Professional w/15 years experience w/ broker/dealer and 10 w/ RIA)
Michael,
As usual, a well written, thought provoking article.
The link you provided to the PIABA Report was very interesting. It included the following: “A review by the Public Investors Arbitration Bar Association (PIABA) of the advertising and arbitration stances of nine major brokerage firms – Merrill Lynch, Fidelity Investments, Ameriprise, Wells Fargo, Morgan Stanley, Allstate Financial, UBS, Berthel Fisher, and Charles Schwab – finds that all nine advertise in a fashion that is designed to lull investors into the belief that they are being offered the services of a fiduciary.”
And then: “Adding to the
confusion is the fact that five of the eight brokerage firms – Ameriprise, Merrill Lynch, Fidelity,
Wells Fargo, and Charles Schwab – have publicly stated that they support a fiduciary standard.
But these firms are every bit as vociferous as the other four brokerages in denying that they have
any fiduciary obligation when push comes to shove in an arbitration case filed by investors who
have lost some or all of their nest egg due to conflicted advice.”
Obfuscate. Obfuscate. Obfuscate. A naive investing public doesn’t have a chance.
Michael, you paint an ideal(-istic) world.
But in that world, the wirehouses quickly lose a large portion of business,
to 1) those who will become DIYers instead of using a highly paid order taker;
and 2) to RIAs whose value-added is newly apparent.
1) is arguably the reason that title- and role-obfuscation by the brokers evolved over the past two decades, as discount commissions prevailed and securities research became widely available on the Net.
Politically, your scenario just can’t happen, given powerful entrenched interests 🙁
An RIA
Greg,
If I had to pick which is more politically feasible – 1) writing a NEW “uniform” fiduciary standard that adheres to fiduciary tenets, or 2) simply enforcing an EXISTING law already on the books – I’d go with #2 in a heartbeat. If the concern is political feasibility, pushing for enforcement of existing rules is far more realistic than the current approach of writing a NEW rule and praying that political and lobbying interests don’t undermine the quality of the new rule.
– Michael
Michael,
how about option #3: prohibit dual registration.
it would be better for investors, it would simplify regulation, and it would not compromise the fiduciary standard.
larry
Larry is absolutely right. Simple solution is to stop dual registration. The threat of liability would for broker dealers back into their proper role OR the would have to drop being brokers and be RIAs only.
I am in general agreement, Michael. The tough to enforce part is the use of generic language. For example, you suggest that investment advisors be permitted to be called financial advisors while brokers be called what they are. Why substitute “financial” for “investment”. One might surmise that an investment advisor is thereby qualified to offer more than investment advice and there is no inherent qualification that would support that interpretation. Financial planners may also be investment advisors; the reverse isn’t necessarily true at all. What we really need is some regulation that precludes selecting terms that by inference imbue a certain qualification for the title holder. I don’t know how one does that, but it is what I believe is needed. The term “financial advisor” is so common and so undefined that anyone can assert that is what they are. And therein lies the rub!
John,
The issue is the word “advisor”, not “financial” vs “investment”.
If the broker wants to use the label “financial broker” or “investment broker”, fine. Advisor, or a clear synonym to advisor, is what triggers the registration AS an advisor, since almost by definition if you hold out to the public AS “advisor” then your “advisor” services can’t possibly be incidental to brokerage services anymore…
– Michael
When I was going through my CFP classes some years back the instructor said something pretty powerful. He said he printed on his business card (something like): Securities Salesperson. He said he didn’t want any ambiguity about his role in the transaction. He was/is a CFP and CFA as well. He said he didn’t want to be a fiduciary and didn’t want clients to misunderstand his value proposition. He made a deliberate choice in how he wanted to be compensated and kept it simple. I generally agree with this article and think that many of the problems faced by consumers could be addressed by simply having the EJ/MS/local broker, etc, be labeled on their business cards as “salesperson”. Even when registered as an IAR they should be a “salesperson” to the public and then follow up with CFP or some additional meaningful credential to add value. That way they wouldn’t be misconstrued (on purpose or otherwise) as fiduciaries even though they are technically wearing two hats in the transaction. People talk about food labeling for GMOs, but I think proper labeling of “advisors” would be hugely beneficial and might save some trouble (and investors as well).
How about calling the categories: Securities Delaer and Financial Advisor? Whether only invests, or sells or what not , without ADVICE, is a “broker /dealer. Any one WITH ADVICE , sells, buys or not is an “ADVISOR ” and a FINANCIAL ONE AT THAT, since investment too is a financial decision!
Leave the brokers alone, but increase their reporting requirements to Customers and Govt agencies.
Regulate Advisors thru fiduciary standards, but no special reporting requirements, unless under examiniation!
Technically, brokers ARE “Registered Representatives” of a broker/dealer already, and are regulated by the National Association of Securities Dealers (now called FINRA, but substantively they’re still the NASD as the only thing that changed a decade ago was the name).
They just don’t hold out as such to the public, and the SEC refuses to require registration as an investment adviser despite the fact they are communicating to the public that their advice is a primary service and not merely one that is incidental to brokerage services.
– Michael
I was under the assumption that a uniform fiduciary standard would force people who sell financial products to label themselves as such. I missed the point until I read Michael’s article. It’s clear that folks selling products for commissions should never be allowed to call themselves an advisor. It’s unfortunate that the brokers / insurance agents of the world were permitted to call themselves advisors. This evolution should have never happened in the first place. The best solution for the industry seems to be to make folks who sell anything remove the “advisor” labeling.
However, I feel that the best solution for the public at large would be 1 uniform standard, the same as doctors and lawyers. This might be naive thinking and I recognize a potentially valid counter argument here- that clients with smaller balances or incomes couldn’t afford any guidance. I disagree with this counter argument. In my own practice I have clients with $20,000 invested and I have clients with $3.5M invested. Technology, and a proper expectation of the services the clients are paying for are what allow me to service smaller accounts. It’s true that I don’t execute the full scope of planning services for the $20,000 clients, but they enjoy the same investment portfolio as the $3.5M clients. Perhaps it’s stupid of me to make $200 / year from the smaller clients, but meeting once a year with the clients and performing rebalances when necessary isn’t costing me to have them as clients. Their sensible, low cost portfolio is a better option that some mutual fund with a sales load the broker churns every few years, or some shiny annuity product (with a big commission) they probably don’t need at this point in their lives. If an advisor isn’t willing to adopt technology or a similar approach (as mine) with smaller balances, then the counter argument against a fiduciary standard becomes valid- they need a butcher! My 2 cents.
My question for Michael is what would you propose for all the advisors who are dually registered as brokers and advisors. Before starting my RIA, I was one of these types. I was taught to sell products when I could earn more commission revenue, and I was also encouraged to sell planning and investment advisory services. At my firm, there was much discussion among advisors (or brokers, whichever term you want to use) on the best way to maximize revenue. In my 5 years there, I cannot recall one instance where there was talk of “what’s best for the client”. For all the hybrid firms out there selling advisory services and products, most seem to call themselves “Independent Firms”, what happens? Do they have to choose one camp or the other to continue on? Or, do they have to perform the confusing task of disclosing when they are acting as a salesperson while selling the life insurance policy in the middle of a financial planning review meeting (where they should be acting as an advisor)? That back and forth switching of hats is crazy, and how many reps / advisors would actually do this whenever they changed standards? What is the operational solution, if any, in this scenario?
Thanks,
Greg Lessard
I very much agree that the issue here is the distinction between the two has become blurred, to an extent. But I also think it is a little naïve of regulators to presume putting a uniform fiduciary standard in changes anything. None of the proposals I’ve seen eliminate commissions. Heck, RIAs today are allowed to collect commissions, Fiduciary Standard notwithstanding. And insofar as recommendations go, it’s all a matter of opinion. If you can reasonably argue that a high fee variable annuity is providing some benefit to your client that makes it in their interests, you can recommend it under either standard. In that way, I think this debate is something of a red herring.
Merely because one is held to a certain rule doesn’t mean you’ll follow it or be mentally equipped to execute its requirements. No matter what the SEC does here, no rulemaking is going to replace a client doing the appropriate amount of due diligence to determine what form of help and which practitioner is best suited to their needs.
the term ‘broker’ has a negative connotation to most consumers and as such, it would be very bad for business to go back to that name. i would imagine significant push back from the bd community even if it is more appropriate. in addition, the argument from the bd’s might be that the vast majority of their business is fee based advisory with no commission for distribution. very different than the business 30 years ago.
If they’re fee-based advisory they generally need to be RIAs now. That’s “special compensation” that triggers registration. That was the whole point of the Broker-Dealer Exemption rule that was struck down in the FPA lawsuit – that exemption would have allowed fee-based wrap accounts for brokers without requiring registration as an RIA, but that exemption is dead. (Thus the explosion of dual-registered advisors already.)
– Michael
This is about what is best for the customers. It would be bad for business for the customers to understand how terribly conflicted their “friendly” broker is. But it would be great for customers.
I agree, doesn’t change the fact that there would be huge resistance from the bd community as it would affect the bottom line
Absolutely. They will fight it with everything they have because their livelihood would be at stake. The problem is that there is no one who stands up for the consumer, for whom investing, while critically important, is not a full time activity. Most are too busy earning a living to realize how badly they are being abused.
You are right on. The problem is that nobody will want to be sold in the professional environment and we won’t need all those salespeople. Hence the attempt to legitimize them as professionals.
Michael, I commend you for your ability to clearly delineate the underlying issues that make this such a tricky issue to resolve. I do agree with you that it would be easier (from a regulatory standpoint) to focus on enforcing existing law than to try to create and seek agreement on a new regulatory standard for both brokers and advisors. However, even by trying to better enforce the existing laws by painting a “brighter line”, the issue still exists. And I don’t believe your butcher/dietician example completely demonstrates the issue.
It is not surprising that companies seek to differentiate their services by titling their employees as financial planners, wealth managers, etc. This is called marketing. Both brokers and advisors are in the business of selling a product. Brokers sell investments. Advisors sell advice. The problem is that many clients (not all) are potentially going to be looking for ‘guidance’ on whether the product (i.e. stock or mutual fund) is right for their personal financial situation. That implies advice. And determining whether the advice is “solely incidental” is where the devil is, and where brokerages have been able to push the boundaries (no surprise there). As I see it, unless brokers are required to ONLY sell products, and are restricted from providing any advice (which I don’t see as realistic), the issue will always exist, and we’ll see the same issue continue to re-emerge after every new suitability/fiduciary lawsuit.
What may clarify the issue is requiring the client to proactively select the expected nature of their relationship at the onset. If they are looking for a relationship of a ‘fiduciary nature’ or ‘advice’, have them state that explicitly. Then the broker/advisor can then clearly determine whether they are qualified (from a regulatory standpoint) to provide what the client is looking for. If the client is really only looking for ‘a cut of meat’ then that will also be clearly understood, and any unintentional conflicts can be avoided.
Sounds to me like the Unions, public and private need some help funding their pension plans. This based on the cadre of miscreants gathering around regulators to formulate new rules. People!!! Hang onto your IRAs and 401ks and Keoughs or whatever private retirement funds you have saved. Skeptical concerning the Governments intentions. They tend to be money grabbers.
Even if there were a clear line, there will always be those who attempt to blur it because they can make a fortune doing so. Most investors won’t appreciate the nuanced differences.
Full disclosure might help. When you sell something to someone, you need to disclose how much you are making off it it (directly, indirectly, now and in the future).
What is most troubling is that the industry is so scared of being held to a fiduciary standard. They know they are selling things that are not the best for their clients. Shame on them.
Great piece Kitces. I hope this gets into the hands of regulators making these decisions and is taken into consideration. I am convinced it’ll be more effective than reinventing the wheel with a new rule. Please comment on how would dually registrants fit into this. This duality is at the root of the confusion being created for clients. If broker and an IA would be required to hold each other out as such, how would it be for a dually registrant? How could they be kept from conveniently switching on/off the fiduciary hat? I’d appreciate your comments.
Good post made me think about reconsidering my position
The only really good answer to this conundrum is to: 1) require that ALL advisors and ALL brokers follow EXACTLY the same initial meeting discussion with the client to start with a level playing field of understanding, and 2) have the client delineate his or her needs and expectations of the advisor or broker, so the ultimate type of service determination is clear as to which type the client gets. That initial meeting discussion should include accurate identification of the financial professional as either an advisor or a broker (not both) and what this means to the client using some standard of phraseology adopted by the SEC/FINRA, so that there’s NO misunderstanding to the client what each role does and how that professional makes money off the client. This then clears the decks for proper practice by the financial professional, with the client fully informed up front as to the nature and scope of the practice by that professional and how it affects the client. And maybe there’s a one-page form that every client must sign attesting to the client’s understanding of the above points, before ANYTHING further can be done by the professional. No client signing a form of understanding = no service by the professional; it’s that simple!