The brash opposition to what's known as a "fiduciary duty" is but the latest reminder that the attentive advisers portrayed in the industry's marketing are the stuff of fairy tales.
For investors who have faced off against their brokers in arbitration, the arguments have a familiar ring. A common position brokers take in litigation is that they have no obligation to put customers first.
"These guys advertise like doctors and lawyers and litigate like used car salesman," said Joseph C. Peiffer, president of the Public Investors Arbitration Bar Association, or Piaba, a group of lawyers who represent investors in securities arbitration.
As things stand today, brokers need only sell "suitable" investments that match a client's investment profile. But they needn't act as fiduciaries who are duty-bound to put clients' interests ahead of their own, as investment advisers are expected to do.
Thus, a global equity fund weighed down with fat commissions and high management fees might make the cut as suitable for a client. But a similar fund with rock-bottom fees could be the pick that's in that customer's best interest. In the absence of a regulation demanding it, there's little motivation for a broker to peddle the latter.
The unsightly fiduciary battle that has Wall Street waging war against the idea of doing the right thing for its customers is being fought on two fronts.