Another blog comment that advances the fiduciary discussion comes from an old friend, Stan Hargrave, posting in response to my blog #110 "Real World Woes…." Stan's a recovering CPA who's one of the best, most ethical financial advisors I know. He's also done a lot of expert testifying in arbitration cases, so his observations about brokers and clients in litigation carry a lot of weight. In fact, I can't take issue with anything he says, except, of course, his conclusion. (Are you beginning to see a pattern here?)
His description of brokerage clients not only parallels my observations, but is consistent with the picture painted by many folks who work with the financial public: They sign documents (including risk tolerances) without reading them, don't look at monthly statements, don't know the difference between making returns and getting their own money back, and "just want someone to trust, but don't know what that means."
What Stan has described is the textbook "consumer" in a classic professional/patient-client relationship. Do you really think any of us are different when we go to a doctor or lawyer? We don't really understand what they are telling us, until they get to the "So here's what you need to do" part. Sure, we're advised to get "second opinions" about major medical procedures. So now we have conflicting suggestions about what we need to do from two doctors we don't understand. Feel better? (The same thing happens when I follow the golf pros' advice to read my putts from both sides–looking from the ball to the hole, and then from the hole to the ball: now I see the ball rolling in two different directions. Brilliant.)
