Expert Q&A

Many “wirehouse” firms may not be required to sell certain products as suitability can become an issue but are limited to the different options available to offer clients. The broker/dealer has to have a selling agreement with the company and their products. Many wirehouse firms usually are on contract with a few and sometimes have revenue sharing with some of those companies to incentivise the reps in those products direction. I used to work in the wirehouse business model and found much, much more investment freedom and options to offer in the independent channel.

The truth is that most “Wirehouses” do not have a requirment to sell a certain investment and are just as open architecture as other investment firms. There are a lot of checks and balances in a major firm to protect the client from bad advice because they want to protect the firms reputaion. After the last few years that is even more important. Most major firm don’t allow certain investments to be sold because of conflicts, ie. high commisions, illiquidity, etc. Find someone with the heart of a teacher.

Don’t you think that financial advisors should always make recommendations and decisions that in the best interest of the client?

That is the definition of a fiduciary.

Why then would you suppose that the big brokerage firms oppose and are intensely lobbying against that provision in the Dodd-Frank Bill that would impose a fiduciary standard for all their advisors that would have them make all decisions in the best interest of their clients?

Both! Ask who is their broker/dealer? If their broker dealer is a major “wirehouse”, – most likely there will be “internal” proprietary sales requirements. On the other hand, “independent” advisors can place business in almost any area in which they are licensed, – but even here they have minimum production limitations.

All depends on the firm.

Some are required to sell specific products, I am not.