Film recommendation: Linda’s fiduciary cake

Regulatory standards regarding information and advice provided by financial professionals are incredibly important. These issues are also incredibly complicated and boring. ”

Fiduciary vs. Suitability standard….” The phrase induces narcolepsy just hearing it, unless you happen to be really into this issue or you have a financial stake in the accompanying government regulations. That’s a real challenge in addressing key personal and policy concerns.

I financed this short video, which debuted at Huffington Post, to help address this challenge. (See the site I created at for more information. I’ve drawn from there in this post.)

I’m responsible for the script and everything in it. I’m grateful to Frey Hoffman, who co-wrote the script with me, and skillfully directed, filmed, and edited the video. Frey has helped me before in making other videos you may have seen. His expertise at Freydesign productions makes these possible.


The film is roughly based on Chapter 6 of  my book, with Helaine Olen, The Index Card: Why Personal Finance Doesn’t Have to be Complicated,  about which RBC reader are all too familiar.

Helaine and I would obviously be gratified if you bought the book. But you don’t need to buy our book to grasp the basic personal and policy issues presented in that this video. The fine print that scrolled across the screen is from actual Fidelity paperwork, and can be found here. This 2012 New York Times article by Tara Siegel Bernard provides additional information.


I should make something clear, too. I’m convinced that many people can benefit from sound advice from a financial professional: What are the different retirement savings options available to me? How can I sensibly save for my child’s college? Are we ready to buy that dream home when the mortgage payments may stress our monthly cash flow? Personal finance is scary and complicated. It never hurts to have another pair of eyes to examine what we are doing.

Yet the very anxieties and consumer ignorance that lead us to seek financial advice make us vulnerable when advisors face financial incentives to steer us towards overpriced or unwise investment products.

It’s not that financial professionals are defrauding people or are criminals on the Bernard Madoff model. They are simply steering people into investments that are notably more costly than they need to be.

Audit studies in which actors pose as young couples seeking financial advice indicate that biased advice is ubiquitous within the industry. The study published here is quite depressing.

Author: Harold Pollack

Harold Pollack is Helen Ross Professor of Social Service Administration at the University of Chicago. He has served on three expert committees of the National Academies of Science. His recent research appears in such journals as Addiction, Journal of the American Medical Association, and American Journal of Public Health. He writes regularly on HIV prevention, crime and drug policy, health reform, and disability policy for American Prospect,, and other news outlets. His essay, "Lessons from an Emergency Room Nightmare" was selected for the collection The Best American Medical Writing, 2009. He recently participated, with zero critical acclaim, in the University of Chicago's annual Latke-Hamentaschen debate.

2 thoughts on “Film recommendation: Linda’s fiduciary cake”

  1. A couple of points:

    1. The term "investment adviser" as used in the Huffington Post article is overbroad. Firms that are Registered Investment Advisers (with the SEC or the states) are already fiduciaries to their clients and are required to disclose all actual and potential conflicts of interest to clients. The proposed rules will impose a fiduciary standard on broker-dealers and insurance agents and brokers.

    2. Many brokerage customers willingly purchase higher-priced products in exchange for "incidental" advice from their brokers. For example, a broker may assist a client with financial planning or work closely with a client's accountant and/or attorney in estate planning, retirement planning, helping family members review estate holdings, etc. These "incidental" services may not involve securities transactions, and so the broker is not paid for them.

    If brokers can only offer the lowest-paying investments, their incentive to offer incidental services to retail clients will evaporate. The unintended consequence of this well-meaning rule may be to leave lower-income investors with no options beyond on-line brokers and robo-advisors.

    1. Who said anything about "the lowest-paying investments"? The fiduciary standard imposes a duty to recommend those that are in the client's best interests, whether these pay the adviser high or low fees.

      We need to keep a sense of proportion here. The sums at stake in the investment advice (the difference in the long-term payoff between good and bad) will typically be thousands of dollars. The "incidental advice" is worth a few hundred.

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