On the Web site of the Edward Jones brokerage firm (www.edwardjones.com), under the information and accolades about the company and its investment insights, you'll find the words "Revenue Sharing Information" near the left-hand corner of the home page.
If you click on the link to related pages and wade through the legalese, you'll learn that "product partners" paid Edward Jones $156 million in 2008, half the firm's profit for the year. (No figure had been posted for 2009 when I looked.)
"Product partners" are companies that pay Edward Jones when it sells their products, including mutual funds, college savings plans and annuities that account for virtually all of Edward Jones' sales in those areas.
Those payments, called revenue sharing, create a "potential conflict of interest" for Edward Jones and its financial advisers, the firm acknowledges on its Web site.
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In plain English: When Edward Jones brokers recommend a product, you can't be sure it's because it's best for you or best for them.
To be fair, Edward Jones is no different from many other brokerage firms in that regard. The revenue-sharing arrangement - which went undisclosed before a class-action investor lawsuit - is just one example of why consumer groups and others are pushing for a "fiduciary standard" for brokers and anyone who gives investment advice.
Fiduciary standard means putting clients' interests first, as registered investment advisers are legally required to do. Brokers generally are held to a less strict "suitability" standard, meaning recommendations must be suitable to the client but don't have to be the best for them.
There is "really no dispute" that the fiduciary standard is higher, said Mercer Bullard, professor of securities law at the University of Mississippi and founder and president of Fund Democracy, an investor advocacy group.
Bullard, who used Edward Jones as an example, said that, under the suitable standard, brokers are free to pick the fund that pays them the biggest commission from among a group of suitable funds, even if it is "less suitable." A fiduciary standard also would require brokers to prominently disclose any conflicts of interest. Bullard said Edward Jones' small-print, "back alley" Web site posting "does not even come close to meeting the disclosure requirements" of fiduciary duty.
Besides Bullard, representatives of the Consumer Federation of America (CFA), AARP and North American Securities Administrators Association (NASAA) support a provision of the proposed Restoring American Financial Stability Act extending the fiduciary standard to brokers, insurance agents and others who give financial advice.
They are urging Congress to resist what they call lobbying efforts by the brokerage and insurance industries to water down or stall the fiduciary standard provision.
Contact Humberto Cruz at AskHumberto@aol.com or in care of Tribune Media Services, 2225 Kenmore Ave., Buffalo, N.Y. 14207.