And … How We Can Fix It

By Dr. David Edward Marcinko MBA MEd CMP®

The Rules As I Understand Them

Securities industry Regulations and Regulators recognize that (registered) investment advisors give advice, while stock brokers sell brokerage products. Thus, the Series 65 license is required to become a financial advisor, while Series 7 licensed stock-brokers are not (and cannot) be fiduciary advisors.

So, advice is subject to a fiduciary duty, while product sales (brokerage) activity is not. The ratio of fiduciary advice to brokerage sales is about 1:99. So, what does that tell you?

A Contentious and Complicated Issue

This issue is so contentious and complicated today that lawyers are needed to define each and every term, engagement, transaction, brokerage or advisory contract, etc. It is far too amazingly contorted and complicated for most; including me; and we have even discussed the industry machinations and political double-talk on this ME-P previously; from some vary sharp industry experts, too.

The Fiduciary Conundrum

The “work-around” for these rules is industry “dual-registration”. Simply put, just get licensed to do both; as I did. Charge a commission when selling stuff and charge a fee for advice. And ideally, do both at the same time; while getting paid for both sides.

As a naïve luddite, I learned this little truism in financial planning school decades ago, and as a doctor and fiduciary for my patients at all times, almost vomited.

Of course, there were more sophisticated students in our classes who regurgitated the standard industry opinion: “We’ll give the client a financial plan for free IF we can sell commissioned products.”

Ideally this meant a fat and fully commissioned wrap account, whole-life insurance policy, LTCI policy; etc. Or, sell products and collect fat ongoing, and often unrecognizable AUM fees [fee-only], too!

From the stock broker-advisor’s POV, it was “Heads I win – tails you loose” for the client. Now, you know why I am a former or reformed certified financial planner.

The Physics Split

Know that as a pre-medical college student years earlier, I leaned about the Werner Heisenberg Uncertainty Principle, in physics class.

Of course,  true Advice – is not Sales …  and Sales is not Advice. Both should never be; simultaneously. So, let’s ditch dual registration and decide which to pursue … and then proceed accordingly. Both sales and advice have risks and benefits to client and producer; both have advantages and disadvantages to both; as well.

WHY? Just like the Werner Heisenberg Uncertainty Principle; it shouldn’t [shan’t] be both; at once.

NOTE: In quantum mechanics, the Heisenberg uncertainty principle is any of a variety of mathematical inequalities asserting a fundamental limit to the precision with which certain pairs of physical properties of a particle, known as complementary variables, such as position x and momentum p, can be known simultaneously.

So, in physics, I can tell you where you are -OR- how fast you are going; but not both. Thus, if it is product sales; it is not advice.

Today, since “dual registration” is still allowed, my suggestion to clients is to seek a fiduciary in all matters 24/7/354; get it in writing, and try  to avoid arbitration and “best interest” or BICE clauses! Run from [fee-based and fee-only] AUM fees, too.

PS: I am not against Series #7 representatives and product sales. Salesmen/women often provide a valuable service and should be appropriately compensated. I only object when fees, costs, charges and commissions are duplicative, excessive and/or not fully disclosed to the client. Since excessive is an arbitrary term; full disclosure is the key ingredient.


So – How am I wrong, mistaken and/or what did I miss? Do tell! Should We – Can We – Ditch Dual Registration [DDR]?

Oh! In the future, I also hope that State fiduciary standards will potentially cover both non-ERISA and ERISA situations, and employee plan participants will have access to full discovery rights, the one thing the industry fears most.

But, that’s a discussion for another day and time.


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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements.



Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™


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