In the world of investment advisors, there exists certain kinds of pay that earn the name "conflicted compensation." We know...it sounds like a paycheck that needs a psychiatrist. Rather, these represent kinds of compensation that might cause some conflict of interest for the investment advisor.
For instance, if an advisor overseeing your retirement account got paid each time they made a transaction, that could lead to a conflict. The advisor would have an incentive to make transactions and might be tempted to churn things a bit just to run up these kinds of payments.
So, in general, "conflicted compensation" is banned by industry standards. However, an exception can be made if the advisor gets a best-interest contract exemption. The goal of the rule is to allow other types of financial professionals, like broker dealers, to participate in retirement investing.
If certain requirements are met, and if the investor signs a document allowing it, a BICE can open up certain kinds of commissions and fees that would otherwise be considered inappropriate.
Related or Semi-related Video
Finance: What does it mean to have fiduc...51 Views
Finance a la Shmoop! What does it mean to have fiduciary obligation? Alright well
fiduciary refers to the responsible person, who has oversight, above a given
financial transaction, or process. That is, it is the fiduciary obligation, of the
head of a corporation's Audit Committee, to be certain that the
accounting process is handled fairly, objectively, inclusively and thoroughly [boss overseeing worker]
and there are a few other ly's in there, but well you get the gist. Doesn't it
seem strange, that some companies just seem to get into the same kind of
trouble again and again. Remember the BP oil spill, well it wasn't the first time
they'd had, an accident. You know, if you can call that spill only an accident.
What kind of oversight did they have? Any? Well some companies just have a [man carrying oil barrel
corporate culture that's run by the notion, that well, whatever isn't caught
as a crime, is legal. Lots of Wall Street stock brokerages came and went this
way. Yah, remember the Wolf of Wall Street? Kind of like that. Well what is
the obligation of a responsible party when faced with ethical dilemmas? Where
does the obligation start and stop? Should fiduciaries be held to a higher
personal standard than normal people? Yah, kind of the, you know, Harvey
Weinstein effect there. Yes, No, maybe, alright. Right, all three times. [question ABCD chart]
It's definitely yes, no, or maybe.
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