Home > Journals > St. John's Law Review > Vol. 94 > No. 2
Document Type
Note
Abstract
(Excerpt)
As Americans, there is hardly anything we value more than freedom. Being “free to choose” is the core guarantee through which we pursue our livelihood and succeed at happiness. The more choices, the better. But what if we we are supposed to choose blindly? In our postindustrial society, we often feel overwhelmed by the myriad choices we must make simply to get through our daily lives. To inform our choices, we rely on assumptions. More importantly, we rely on each other.
Reliance is central in the world of financial investments. Financial products are increasingly complex, and investors need specialized information to choose suitable investments. In our current economy, more than half of all families own stocks either directly or indirectly as part of a fund, and many resort to the services of a financial services professional. Americans place their hopes for economic progress and stability on financial advisers, who can be broker dealers (“BDs”), investment advisers (“IAs”), money managers, investment consultants, financial planners, general partners of hedge funds, and many others who get paid for giving personalized securities advice. However, investors largely ignore that most of these professionals are not required to disclose all conflicts of interest, or to put their own interests aside when making recommendations. Only registered investment advisers must adhere to this fiduciary standard, and the consequences to investors can be devastating.