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Watch that Signatory – Read that Contract
By Dr. David Edward Marcinko; MBA, MEd, CMP™
http://www.CertifiedMedicalPlanner.org and http://www.MarcinkoAssociates.com
Did you know that Federal and state laws require Registered Investment Advisors [RIAs] be held to a fiduciary standard? To satisfy this extremely high legal standard, an advisor must act solely in the best interest of the client, even if that interest is in conflict with the advisor’s own financial interests. Investment Advisors [IAs] must disclose any conflict, or potential conflict, to the client prior to and throughout a business engagement. Investment Advisors must fully disclose, in writing, how they are compensated. In addition, most adopt a Code of Ethics to ensure that fiduciary obligations are achieved.
Brokers or Advisors
Unfortunately, not all “financial advisors” work for federally or state-registered investment advisory firms. Many so-called financial advisors are registered representatives, better known as stock-brokers, and are employed by brokerage firms [broker-dealers]. Generally, these registered representatives [RRs] need not comply with the fiduciary duty standard that is owed when you are dealing with a registered investment advisory firm. Because broker-dealers are not necessarily acting in your best interest, the SEC [remember what a fine job former Commissioner Chris Cox did for investors in the Bernie Madoff incident?] and FINRA [NASD] require them to add the following disclosure to your client agreement.
Disclosure
Read this disclosure, and decide if this is the type of relationship you want to dictate your financial security:
“Your account is a brokerage account and not an advisory account. Our interests may not always be the same as yours. Please ask us questions to make sure you understand your rights and our obligations to you, including the extent of our obligations to disclose conflicts of interest and to act in your best interest. We are paid both by you and, sometimes, by people who compensate us based on what you buy. Therefore, our profits, and our salespersons’ compensation, may vary by product and over time.”
Disclaimers
If this disclaimer appears in agreements you are signing, or have already signed, you should ask questions of your advisor. S/he’s probably a broker. Obtain complete disclosure about how he or she is compensated, and where his or her first loyalties lie. Then decide if the relationship is in your best interest [Source: www.focusonfiduciary.com NAPFA Consumer Education Foundation]. Also, consider mediation and arbitration clauses very carefully. Do not wave your rights to litigation. Your patients do not; and neither should you!
Assessment
I am a doctor, former stock-broker, registered-rep, certified financial planner and licensed insurance agent who decided there must be a better way to help physician colleagues. As a health economist, and Founder of www.CertifiedMedicalPlanner.org I’ve believe I’ve found that way.
Read more:
- FINRA Candidate Says He’d Represent Firms, Not Investors
- Why FINRA’s Broker-Comp Rule Works for Advisors
- FSI Warns on DoL Fiduciary, FINRA CARDS Rules
- FINRA Chief Pans DoL Fiduciary Proposal
- DoL Adding 15 Days to Comment Period on Fiduciary Proposal
Conclusion
Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.
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. Contact: MarcinkoAdvisors@msn.com
OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:
- CLINICS: http://www.crcpress.com/product/isbn/9781439879900
- ADVISORS: www.CertifiedMedicalPlanner.org
- FINANCE: Financial Planning for Physicians and Advisors
- INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors
- Dictionary of Health Economics and Finance
- Dictionary of Health Information Technology and Security
- Dictionary of Health Insurance and Managed Care
Front Matter with Foreword by Jason Dyken MD MBA
“BY DOCTORS – FOR DOCTORS – PEER REVIEWED – FIDUCIARY FOCUSED”
***
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Filed under: "Advisors Only", "Doctors Only", Ethics, Financial Planning, Investing, Marcinko Associates, Op-Editorials, Portfolio Management | Tagged: Bernie Madoff, brokerage account, certified medical planner, CFP, Chris Cox, CMP, david marcinko, fiduciary, financial planner, FINRA, IAs, iMBA, investment advisor, Marcinko, NAPFA, NASD, registered investment advisor, registered representatives, RIA, RRs, SEC, stock broker, www.certifiedmedicalplanner.com, www.medicalbusinessadvisors.com |
The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants 
Dr. Marcinko,
Allow me to emphasize to your readers; do not sign a brokerage arbitration agreement.
Sam
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Dr. Marcinko and Sam,
You are so correct. Take a look at this article I just found in an industry trade magazine:
http://www.fa-mag.com/fa-news/4471-protecting-against-arbitration.html
The bottom line, as you always say, is buyer beware.
Thanks.
Donald
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Do you trust Citi?
Citigroup just announced that it would convert its small North American bank brokerage business completely to a fee-on-assets-based fiduciary advice system, and would stop collecting commissions on stock and fund sales.
http://registeredrep.com/news/citi_bank_brokerage_converts_to_fees_1005/
Beware brokerage accounts … or beware Citi?
Stetson
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The financial markets may be coming back, but the outlook for many financial advisors is not so good. Ever wonder why?
http://www.fa-mag.com/fa-news/5048-2010-looks-fairly-bleak-for-brokers.html
Shawn
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Dr. Marcinko,
A new Financial Industry Regulatory Authority [FINRA] proposal to significantly expand public information about stock-brokers will fill gaps that remained after earlier changes, according to this essay and related investor advocates.
Public May Get More Access To Broker Records
http://www.fa-mag.com/fa-news/5214-public-may-get-more-access-to-broker-records.html
It’s about time!
Martin
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SEC Charges Former Napfa Chairman With Defrauding Clients Of $47.5 Mil
The SEC has charged former Napfa chairman Mark Spangler with defrauding clients by secretly investing an estimated $47.5 million of their money in two risky start-up companies he co-founded.
http://www.fa-mag.com/fa-news/11009–sec-charges-former-napfa-chairman-with-defrauding-clients-of-475-million-.html
Carl
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Martin,
The current FB debacle is more food for thought on this issue.
http://money.msn.com/technology-investment/news.aspx?feed=OBR&date=20120523&id=15143547
Dr. Higgenboth
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NAPFA’s New Chair Takes on FINRA
Dr. Higgenboth – One Mr. Ron Rhoades has advocated for a fiduciary standard in his career as an estate planning attorney, financial advisor, and more recently as a college professor.
http://registeredrep.com/news/napfas_new_chair_takes_on_finra_518/?NL=RGR-06&Issue=RGR-06_20120523_RGR-06_18&YM_RID=marcinkoadvisors%40msn.com&YM_MID=1314010
He will lead the board of the National Association of Personal Financial Advisors at a key time for his industry, as Congress weighs new oversight for registered investment advisors.
Lloyd
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Beware [Physician] Investors – Here’s Why!
[FINRA Candidate Says He’d Represent Firms – Not Investors]
Fiduciary advocates expressed concern after FINRA member firms elected a “dissident” candidate to its board of governors after he said he would represent brokers, but not investors — the core constituency FINRA says it exists to serve.
Brian Kovack of Kovack Securities beat out FINRA’s endorsed candidate John Muschalek, vice chairman of First Southwest Company, to represent mid-sized broker-dealers with 151 to 499 advisors.
When asked last month if we would represent investors on the board, Kovack said simply, “No. I would not.”
“I think he’s just being honest,” says Melinda Steuer, a securities lawyer, based in Sacramento, Calif. “I don’t think FINRA’s purpose is to represent investors. I think the system is set up to hurt investors.”
Knut Rostad, president of the Institute for the Fiduciary Standard, says he wishes more FINRA leaders were as honest as Kovack. “I disagree completely with his view of his role, yet I applaud his candor,” Rostad says. “He appears to simply say what he means.”
http://www.financial-planning.com/news/regulatory_compliance/newly-elected-finra-leader-raises-fiduciary-hackles-2693745-1.html?utm_campaign=Aug%203%202015-daily&utm_medium=email&utm_source=newsletter&ET=financialplanning%3Ae4873715%3A86235a%3A&st=email
Dr. David Edward Marcinko MBA CMP™
http://www.CertifiedMedicalPlanner.org
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