For years, most investment advisers have been deemed fiduciaries under the Investment Advisers Act of 1940. Brokers were excluded from the definition of fiduciary as long as they were not paid special compensation for investment advice, and gave it “solely incidentally” to their brokerage services and investment product recommendations.

As part of its regulatory overhaul, the Obama administration proposes holding brokers who give investment advice to clients to the higher fiduciary duty – (as investment advisors already are) – a legal standard that would compel them to act in their clients’ best interests at all times. Currently, brokers are held to a looser “suitability” standard, which means they can’t put clients in risk-inappropriate investments, but this does not speak to the inappropriateness and conflict of interest that exists when a broker’s compensation is derived from the type of brokerage account and quantity and type of investment products sold to his/her clients. Many registered investment advisers, by contrast, have operated under the stricter fiduciary standard for nearly 70 years. McKean&McMills,LP is a licensed fiduciary and Registered Investment Advisor. McKean&McMills does not sell, market, or benefit financially from the sale, recommendation, and/or transaction of any investment product or securities brokerage account to its clients.

Source: Wall Street Journal, 2009