The Securities & Exchange Commission is advocating that stockbrokers should be considered fiduciaries. It's a tougher professional standard than current practice, requiring brokers to put their client interests ahead of their own. But this timely article by Smart Money highlights the conflicts of interest rife in finance.
The advice industry is booming -- the ranks financial planners, college aid advisers, mortgage brokers and more are expected to increase by 30% by 2018, to 271,200, according to the Bureau of Labor Statistics. But many of these advisers get paid to peddle specific products, or to encourage consumers to make risky decisions. Among the conflicts: Insurance agents and some financial planners often get the biggest commissions by selling products that can result in smaller savings for consumers. Mortgage brokers profit by originating larger mortgages--even if a buyer has a tough time making payments. And college financial aid advisers rake in fees of up to $1,000 or more to boost financial aid, rarely delivering more than what a family can do on their own.
The old advice is still the best: Caveat Emptor.
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