Professor Alan Palmiter quoted in Barron’s calling for more fiduciary protections to fund shareholders
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August 30, 2011
As former SEC Chairman Manuel Cohen taught, “Wall Street rarely moves toward reform unless it is pushed.”
While the mutual-fund industry wrestles with regulators, consumer groups, independent advisors and Congress about the need for reducing fund fees, disclosure and increased transparency, no one seems to be asking how all this is affecting the industry’s customers.
After all, it’s their money. While everyone is affected by volatile markets, new regulations, contentious elections, depressed home prices, and sunken portfolios, the fund industry’s very visible public intransigence against any type of industry reform should be considered a remarkable political blunder. Not only has this position alienated key professionals involved in the debate—independent financial advisors, pro-shareholder groups, independent trustees—but it’s also affecting individual shareholders and even fund-company employees.
For this reason, load-fund companies should become active and innovative. They should create a new executive-level position of shareholder advocate. The advocate would examine fund activities involving products, sales materials, sales practices, shareholder communications, key account relationships and lobbying to determine how fund company’s activities are benefitting shareholders—if at all.
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