Eddleman and Eddleman LLC has chosen to be a fiduciary for more than a decade. And while we believe that a fiduciary implementation is the best for clients, we also believe that individuals should have the option to choose how they implement financial services. But, there’s been a battle raging over this same decade of who is a fiduciary, who isn’t and who should be. Some of our peers are also fiduciaries; they believe that everyone in the investment industry should come under the fiduciary rule. However, there are alternative ramifications when the government gets involved and starts forcing businesses and individuals to interact in certain ways.

So what is a fiduciary? On a basic level, a fiduciary is an entity that manages the affairs of another with the highest level of care. When it comes to investing, a fiduciary has a legal responsibility to do what is in the best interest of the client. Currently, all investment advisors are required by the Investment Advisors Act of 1940 to be a fiduciary to their clients, while stockbrokers are regulated by the Securities and Exchange Act of 1934, which does not require a fiduciary duty to their clients. Stockbrokers are required to make “suitable” investment suggestions for their clients, but they are not required to make the best suggestions for their clients. For more information on the differences between stockbrokers and investment advisors, read this article from Forbes.

Currently, the Labor Department has proposed a bill that would raise the investment advise standards for stockbrokers. The bill would require stockbrokers and potentially others in the industry to be fiduciaries. Not only would this bill change the way that stockbrokers give advice, but the wording of the bill could also cause a censorship of the media. Media personalities who give advice to individual callers or audience members might no longer be able to express their opinions on specific investment situations. This raises questions about whether or not the bill violates First Amendment rights. This article from Forbes gives a more in depth look at how this bill could cause problems for media members.