Apparently, Senator Tim Johnson Has A Fiduciary Duty To...The Insurance Lobby.

You might think that stock brokers are required to act in your best interest. You would be wrong.

While most of the debate about financial overhaul legislation has focused on the impact on how big banks do business, one piece that would affect consumers directly has received little public notice: a requirement that stock and insurance brokers act in their customers’ best interest.

And that provision may not make it into the final overhaul plan.

At issue is whether brokers should be required to put their clients’ interest first — what is known as fiduciary duty. The professionals known as investment advisers already hold to that standard. But brokers at firms like Merrill Lynchand Morgan Stanley Smith Barney, or those who sell variable annuities, are often held to a lesser standard, one that requires them only to steer their clients to investments that are considered “suitable.” Those investments may be lucrative for the broker at the clients’ expense.

Interestingly, the group that is fighting this the hardest is the insurance industry, because they rely on brokers who give bad advice. And no one represents the industry better than Senator Tim Johnson of South Dakota:

In addition, Senator Tim Johnson, Democrat of South Dakota, is considering whether to recommend a study of the brokerage and adviser industries, a move that consumer advocates say would wipe out the proposed requirement.

“The intent of this amendment is not to improve investor protections, but to delay and deflect meaningful reform,” said Barbara Roper, director for investor protection at the Consumer Federation of America.