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Hybrid wealth advisory firms, whose financial professionals offer both fiduciary advice and commission-based products, have exploded in number ever since the so-called Merrill Lynch rule ended. That SEC requirement, struck down by an appeals courts in 2007, said brokers offering financial advice for a fee didn’t have a legal obligation to put a client's financial interests ahead of their own commission-driven incentives.
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With brokers now required to act as fiduciaries, the highest standard of customer care, when they charge fees for advice or for assets under management, the broker-heavy industry raced to set up a workaround. The answer: firms dual-registered as both an RIA with the SEC and as a brokerage with the Financial Industry Regulatory Authority.?
What did retail investors gain? Little by way of clarity on which hat their advisor is wearing at any given time. Our latest cover story delves into this uncomfortable fact — and what it means for the wealth management industry.
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