Transcripts

"Money File"-Government The Protector

JEFF YASTINE: In the "Money File" tonight, the government's role in protecting investors. Here's Jason Zweig, personal finance columnist at "The Wall Street Journal."

JASON ZWEIG, PERSONAL FINANCE COLUMNIST, WALL STREET JOURNAL: How could Uncle Sam help make the markets safer for investors? Here are a few modest proposals. First, Congress could mandate that anyone giving financial advice must act as a fiduciary, putting the clients' interests first. Investors may not realize that stockbrokers, insurance agents and many financial planners are held to the lower standard of what's called suitability. That means a broker only needs to have a reasonable belief that an investment is right for you, regardless of how much it costs you or pays him. A fiduciary, on the other hand, must disclose any conflicts of interest and take the costs of any investment into consideration. Second, Congress should reform the system of arbitration that settles disputes between investors and brokers. When you open a brokerage account, you essentially sign away your right to sue over any mistake or misconduct that your broker may commit. If you can take your surgeon to court for sewing up a pencil inside your stomach, why shouldn't you be able to take your broker to court if he puts you into investments that were wrong for you? Finally, the government should encourage all shareholders, large and small, to communicate with each other about companies and mutual funds. Shareholders need to be completely free to band together to demand lower pay for management, suggest new leadership or set more consistent standards for long- term success. Ultimately, the best thing the government can do is to give investors the unfettered right to raise their voices. I'm Jason Zweig.