(Feb. 23, 2015) President Obana is unveiling a plan to impose a standard known as a fiduciary duty on financial-services brokers, which will crack down on “backdoor payments and hidden fees,” according to a fact sheet issued by the White House.
That's bad news for Edward Jones, which has infamously made its fortune by steering clueless investors into its "preferred family" of high-fee mutual funds. Those funds return the favor by paying Edward Jones tens of millions of dollars in kickbacks. It has been sued and fined repeatedly for defrauding its customers, but the pain hasn't been sufficient for it to change its devious ways.
Obama's plan would require brokers to act in a customer’s best interest, a change that could limit the earnings of financial advisers in the handling of Americans’ $11 trillion of retirement savings, according to Bloomberg News.
It's called "fiduciary duty," which seems like an obvious foundation for a financial adviser, but Edward Jones has always run like hell from this concept. The firm would lose a big chunk of its fat profits, but investors would finally (theoretically) be getting valid, unbiased advice.
Brokers typically earn money from upfront sales commissions or fees paid by investors who purchase mutual funds. White House officials said that kind of compensation arrangement provides an incentive to recommend products that net higher fees or commissions without yielding better returns for investors. Clients lose as much as $17 billion a year from such conflicted advice, according to Bloomberg.
“The corrosive power of fine print, hidden fees and conflicted advice can eat away like a chronic illness at people’s hard-earned retirement savings,” Labor Secretary Tom Perez said.
http://kronstantinople.blogspot.com/p/edward-jones-saga.html