Last Updated May 16, 2010 11:44 PM EDT
Wow, did I ever speak too soon. Last week, Collins declared herself in favor of gutting these protections for retail investors like you and me.
In brief, a fiduciary duty requires that brokers put their customers' interests ahead of their own. At present, they're allowed to put their own interests first -- for example, by selling you something with a higher commission when a product with a lower commission might perform even better.
Clients aren't aware of this, of course. They think that their brokers are always looking out for them. The reform bill that passed the House of Representatives would turn that mistaken belief from false to true. It required brokers to apply a fiduciary standard of care.
Last week, devious brokers found their champion. Collins proposed an amendment to the reform bill, to exempt from fiduciary duty brokers who sell only mutual funds, variable annuities, and certain closed-end funds. Furthermore, the Securities and Exchange Commission could expand the exemption to brokers selling other products packaged by their firms.
Folks, those are exactly the products that brokers are paid the most to sell and that carry the highest fees. In-house mutual funds cost more, and perform more poorly, then comparable lower-fee funds. The complications of closed-end funds makes them a source of abusive sales. Variable annuities are so laden with fees that it's a miracle if customers come out even.
Collins wants to remove a broker's duty of care in the areas where it's needed most --"where the conflicts of interest are greatest, the investors are least sophisticated, and the sales practices are most abusive," says Barbara Roper, director of investor protection for the Consumer Federation of America. "It paints a target on the backs of senior Americans who are most likely to be targeted with abusive variable annuity sales practices," she said.
Roper is right. I was about to write, "Who does Senator Collins think she represents?," but now I guess we know.