Bad Dog

Bad Brokers

Bad Dog

Despite a push by regulators to raise legal standards for how brokers work with investors, misdeeds keep popping up in the public record.

The latest development is that the Securities and Exchange Commission has settled with Ameriprise Financial Services over allegations the firm overcharged clients in retirement plans by nearly $1.8 million.

“Ameriprise generated greater revenue for itself but lower returns for its retirement account customers by recommending higher-fee share classes,” an SEC official said in a statement.

Of course, brokers behaving badly isn’t a new story. The Ameriprise case comes after the SEC reached a $3.5 million settlement connected to overcharges with UBS Financial Services. Also, discount broker Scottrade has been charged by a Massachusetts regulator with unethical sales practices in retirement accounts.

Brokerages might brush off accounts of such tawdry behavior as happenstance. In fact, the SEC has become concerned enough about reports of abuse that it has started offering a limited amnesty program to brokers who self-report certain mispricing violations.

That no doubt comes as little consolation to thousands of investors who thought they were paying for advice given to safeguard their best interests, not those of their respective brokers.

Enforcement actions like these not only raise red flags about shenanigans of rogue advisors. Such recurring headlines also highlight how differently brokers work compared to registered investment advisors.

At IFA, which is an independently owned and managed RIA, we’re required to act as fiduciaries. IFA must act in the best interest of our clients even if doing so goes against the best interest of IFA.

But good intent is just part of the story. To wear our fiduciary badge with honor in today’s investing landscape, we apply an academic rigor that takes advantage of passive investments. A wealth of research gives us confidence that index funds provide our clients the best chance at achieving the highest expected long-term returns net of fees.