Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Caregivers for aging parents are concerned that the brokers managing their savings may not have their clients' best interests in mind, an allowance permitted because brokers are not necessarily fiduciaries, reports the New York Times . Brokers usually are only required to recommend investments that are "suitable." The Financial Industry Regulatory Authority (Finra) notes excessive and unauthorized trading are some of the leading complaints in customer arbitration cases. The agency estimates there were 166 cases of unauthorized trading in 2017, 209 in 2016, and 145 in 2015, while 142 complaints of excessive trading were submitted in 2017. There also are suspicions that Finra's numbers of complaints raised with brokerage firms are conservative, and securities lawyers say many investors who settle such cases sign confidentiality clauses. Commission-based accounts can make economic sense for investors who do not require many changes to their portfolios but brokers are only compensated each time they conduct a transaction, which means their interests are not necessarily in alignment with those of their clients. Large brokerage and financial services firms have been reducing the potential for conflicts of interest by switching to accounts that charge a flat annual fee for management services. The Securities and Exchange Commission in April proposed a new rule requiring brokers to prioritize their clients' interests, which consumer advocates have opposed, claiming it does not go far beyond what is already required of brokers.