Fiduciary Duty and Investment Brokers

“When I was growing up in the shadow of the Edgar Thomson Works of U.S. Steel a half century ago, it was easy to tell the bookies from the bankers — and it wasn’t just by the clothes they were wearing. If you wanted to place a bet, you went to a bookie; if you wanted to invest, you went to a banker or stock broker.”

This is the lead paragraph from Tom Michlovic’s opinion piece in the Pittsburgh Post-Gazette.

It’s a dead on call. The Wall Street of the day feels no responsibility to the “knowledgeable investor.” The corner bookie has a greater moral responsibility to his client than our modern investment bankers.

Michlovic calls for the requirement of a fiduciary duty for all investment brokers. It would solve a lot of problems and I strongly agree.

But I am more concerned with how we got here and why we got here. At what point did investment advice become a buyer beware game? And how do members of what we would like to think is a advanced civilized Western culture find that abandoning honor, duty, and any semblance of integrity was the proper move?

The ethical abyss we are looking into did not take place in a few days. We are dealing with a cultural and institutional ethos that is places the future of the nation in jeopardy. Whether we exist as a cooperative society able to meet the challenges of history or simply dissolve into suicidal islands of self interest is a real question.

James Pilant

Here’s one commentator’s, Bob Monks, ideas on the subject. (I agree with him on this issue.)