Wednesday, June 8, 2011

Fiduciary versus suitability standard |

Fiduciary versus suitability standard |

My Comment

Although the industry–both domestically and globally–is moving towards a fiduciary standard, care should be taken not to abandon the ‘transactional’ client or a client that willingly trades growth stocks with an advisor who has expertise in this sector–whether it be resource, biotech or hi-tech in nature.
This is slowly becoming an neglected part of the retail industry due to matters of cost and compliance risk. However, it should not be forgotten that venture capital is the essence of the capitalist paradigm–the foundation from which everything else in the industry stems from. The allocation of capital between risk takers and exploration and innovation entrepreneurs is paramount to the success of capital markets.
Obviously, the issue of suitability is an investment principle that has to be clearly established in the opening and operation of a transactional account, but the universalization of a fiduciary standard would not be appropriate or effectual in such instances.
It is important that the industry recognize the importance of the junior resource-technology sectors of the markets and endeavor to accommodate traders and investors who are willing to assume the risks involved–even though it may lead to higher costs and compliance issues–That is the essence of capitalism.

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