In doing some research on the differences between attorney malpractice and the much rarer broker malpractice, I've been looking at stockbroker websites. I have this impression that those Sunday afternoon commercials for stockbrokers are fairly overt, promising implicitly that these firms will guide you through with expert advice that you can trust. However, investors can't sue brokers for faulty advice or a faulty plan unless the plan is patently "unsuitable" based on the investor's proclaimed "suitability." But, if a broker says that Enron is going to go sky high, and then it doesn't, that's too bad. Brokers aren't guarantors; you knew the risks. However, if you went to see an estate planning attorney and asked for a plan to save on estate taxes, and the plan ended up being stupid, you might have a malpractice case. (Note: broker malpractice case law is hard to find, given the securities arbitration scheme that leaves no precedential paper trial. Aaaargh for me.)
Anyway, stockbroker websites are very interesting. Even the "individual investor" pages really focus on the fact that your investing strategy is your investing strategy. They will give you some tools and resources to create and implement that strategy, but it's yours. For example, Merrill Lynch tells you "[f]rom establishing objectives to setting strategy, implementing the solutions and then regularly reviewing progress, your Financial Advisor can help as you implement your own strategies for success." Charles Schwab tells you "[t]hat's why we give you greater control over everything from the investments you make to the accounts you open to the type of advice and service you desire." Is this investor empowerment or liability avoidance?
I cannot imagine a law firm touting on its website that the firm will help individual plaintiffs or estate planning clients "implement your own strategies"? (On the BakerBotts estate planning page, that firm declares, "A detailed working knowledge of the estate tax leads to the successful development, implementation, and defense of the most sophisticated and effective estate plans for our clients." You don't have to develop and implement the plan, we'll do it for you. What about a physician that advertised that his practice "gives you greater control over everything from the medications you take to the type of diagnosis and treatment you desire."
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1. Posted by Happy Fun Lawyer on June 10, 2005 @ 9:17 | Permalink
I'd be interested to know whether this is the way the brokers have historically advertised their services, or whether it's a fairly recent phenomenon. It strikes me that (in advertising in popular media, at least), the trend in broker ads has been to stress the customer's control.
I would imagine this is a reaction to the bursting of the tech bubble; many investors lost their shirts because they relied on their broker's advice and subsequently felt they were misled and/or abdicated too much decision-making. But I bet if you look at ads circa 1999, brokers were touting their ability to steer customers towards the hottests stocks, implicitly suggesting that investors should put their faith in the brokers.
2. Posted by Christine Hurt on June 10, 2005 @ 9:51 | Permalink
That's a really good point. If anyone has an idea of how to get copies of old broker commercials, let me know! The reason I was interested in this issue was that I was reading accounts of investors who asked the broker to sell stocks in 2000, and their brokers talked them out of it. I would think that if I repeatedly told my doctor of a certain symptom, but my doctor pooh-poohed me over and over and I died, I would have a cause of action.
3. Posted by Eric Goldman on June 16, 2005 @ 13:05 | Permalink
Christine, I think you may overstate how lawyers *should* interact with their clients. MR 1.2(a) says (in the new version) "a lawyer shall abide by a client's decisions concerning the objectives of representation and, as required by Rule 1.4, shall consult with the client as to the means by which they are to be pursued." So while law firms may pitch strategies, the final strategic decision is supposed to be the client's. Eric.
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