Clearly, this product is not in the best interests of the investor. There are better ways to earn 1% if that’s what you’re looking for. BUT that’s one hell of a commission, isn’t it? This is precisely why brokers have been fighting to avoid the burden of “fiduciary duty.”
Holding brokers to this standard would legally obligate them to put their customer’s best interests above their own, a standard only “investment advisers” (like yours truly) are currently held to. In short, it would make selling the aforementioned product illegal for stock brokers.
What’s more confusing is many brokers call themselves “financial advisers” though they are not technically “investment advisers” and thus aren’t held to the higher standard of professional ethics.
Personally, I think it’s fine if brokers want to avoid “fiduciary duty.” We don’t expect this of salesmen in any other field. However, they shouldn’t then be allowed to use the term “adviser” or any derivative of the word. If you’re not going to do the right thing by your customer then let’s at least “call a spade a bloody shovel.”