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Which investments are suitable for clients with longer-time horizons?
But how can these companies know what investments are suitable for clients they have never met? "They say, you're not asking us for any advice, we're just executing an order," says Constantine Katsoris, a securities law professor at Fordham University in New York.
In contrast to fee-based advisers, who charge clients based on the amount of money they manage and are required to put the clients' interest first, brokers paid on commission only have to recommend investments that are suitable for clients, regardless of whether one choice costs much more or leads to a higher commission for the broker.
For example, creative hopelessness, the traditional beginning to ACT, is likely to be most suitable for clients who have struggled with their symptoms and are highly motivated to change.
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FINRA's regulations require its members and their representatives to recommend investments that are "suitable" for clients-a definition with holes big enough to drive a truck through.
A portfolio's standard deviation can change and does not offer guarantees; nevertheless, it can be a valuable tool in assisting a professional adviser to create suitable portfolios for clients.
Tseng, 1998 [4]), abbreviated the FBR scheme, is also suitable for heterogeneous clients of different communication capabilities although it is originally designed for homogeneous clients of the same bandwidth.
"Perhaps because of negligence, or the desire for high commissions, sometimes brokers don't do what is best or even suitable for their clients," Professor Talbot said.
The regulator, the Financial Industry Regulatory Authority, said Tuesday that the firm had not considered whether the REITs, which were not publicly traded and invested in extended-stay hotels, were suitable for such clients.
In a report closely watched by Wall Street, the commission's staff said retail investors "generally are not aware" that stockbrokers and their firms are subject to a lesser legal standard, one that requires brokers to make sure the products that they sell are suitable for their clients.
The salespeople who push these things should have moved on to products more suitable for their clients, like plain old mutual funds.
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