MONEY

Should Personal Finance Writers Be Liable for Bad Advice?

After I argued last week that Congress ought to force financial advisers to do a better job for their clients, a reader posted a related question: Would personal finance journalists have to meet these higher standards as well? He followed up with an email:

George, for this fiduciary responsibility that you are advocating — shouldn’t it also apply to you and the other columnists who post advice on CNNMoney? For that matter, why not to Suze Orman and Jim Cramer? Shouldn’t you be able to be sued if your advice doesn’t work out for an investor that took it?

Fair questions.

I can’t say I have years of experience in the field of securities law and regulation, but here’s my short answer: No.

A slightly longer answer (none of which should be understood as an official answer from MONEY’s lawyers or owners): The fiduciary standard I discussed would, in the amendment introduced by Senators Akaka, Menendez and Durbin, be expanded to cover “a broker or dealer, when providing personalized investment advice about securities to a retail customer.” Suze Orman, my colleagues at MONEY and CNNMoney.com and I aren’t brokers or dealers, so we wouldn’t be covered by that legislation.

Even though that knocks us out of a fiduciary obligation in this go-round, I think it’s worth exploring whether we financial journalists do in fact offer “personalized investment advice.” You could argue that we do, since at MONEY and CNNMoney.com we regularly answer questions from individuals seeking advice. But I would disagree, for two reasons.

First, our answers to specific questions — along with all the advice we give in articles that aren’t responding to individual readers — aren’t “personalized”; they’re intended to be useful information for anyone who looks at them. Second, to the extent that we do answer a specific person’s question in a column, I’d say there’s a huge qualitative distinction between what we know about the writer and his or her situation (generally, a paragraph of background information) and what an investment professional knows (or should know) about the particular circumstances of the customers he or she is advising. As a general rule, financial journalists most of the time don’t even meet the fiduciary standard’s weaker cousin, the suitability standard, as part of which brokers are instructed, “Know Your Customer.” I think people seeking advice from personal finance journalists have expectations of us that are far different than those they have of financial industry professionals. We journalists are strangers dispensing free advice; financial advisers, however, are meeting them face-to-face and doing business. While they might reasonably assume that we journalists will have intelligent, well-thought-out answers to their questions, I doubt they believe that our obligations to them are as strong as those of someone they’re paying to ensure their financial security.

Another thought: The fiduciary duty, when it is applied, is usually understood as covering someone not simply who is in a trusted position, but also who can profit at a trusting person’s expense by choosing one course of action over another. Whatever advice we financial journalists might give, we wouldn’t make more money by recommending a lousy investment over a good one — a far different situation from that of a broker who might earn a larger commission by selling you a product that’s worse for you than another that earns him less.

But though my colleagues and I might not be legally obligated to give you good advice, we have selfish motives for doing so. The dumber our recommendations, the more likely you are to figure out we’re giving bad advice, and the more likely you are to lose interest in us. It’s a matter of pride — and continued employment — for a journalist to write material that readers find useful and good; none of us wants to develop a reputation for stupidity.

Granted, a fiduciary obligation might establish minimum requirements of professional competency for personal finance journalists. But who needs such a formal standard when you have the Internet? As I have learned from personal experience, if people think I’ve given bad advice, word gets around pretty quickly.

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MONEY

More Money Friday Roundup: Spirit CEO Speaks & Fannie Execs Surprised

Personal finance from around the Web:

  • Home owners apparently were not the only ones caught off guard when home prices began to fall as the housing bubble burst. Former Fannie Mae executives tell Congress that plummeting prices consistently surprised them as well. [Associated Press]
MONEY

More Money Thursday Roundup: Five Fees to Dump & Why Blondes Make More Dough

Personal finance from around the web:

  • Tax day is fast approaching, and if you haven’t filed yet, it’s probably making you grumble. The Washington Post debunks five myths about your taxes. [The Washington Post]
  • And would you tattle on someone you know is cheating on his taxes? The IRS hopes you will. If you have specific and credible evidence, you could score a payout. [WalletPop]
  • Maybe a dye job should be part of your investment portfolio. Not only do blondes have more fun — they have more money, too, according to a new British study. [It's Your Money]
  • FreeCreditReport.com, the site that promises a free credit report but really charges you a monthly fee for the service, is changing its tune. Slightly. With new federal guidelines requiring such sites to clearly state that the only real source of free reports is annualcreditreport.com, the company has started charging $1 for the report and donating the cash to charity. The move looks like a clever way to get around the new rules. [The New York Times]

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MONEY

More Money Wednesday Roundup: Tax Credits & Hedge-Fund Flatulence

Personal finance from around the Web:

  • If you are sending a kid to college next year, this is the week financial aid offers should be arriving from colleges and universities. To help cushion the blow of what can sometimes seem a paltry sum, here’s advice on how to negotiate for more aid. [ABC News]
  • Rather than focus on the medical impact of not having health insurance, a new study looks at the financial impact. And guess what? It’s bad. If a member of an uninsured family is struck by illness, the household will lose 22% to 51% of assets within two years. [The Huffington Post]
  • There’s a financial-industry metaphor in here somewhere: A New York hedge fund manager has published a children’s book all about a Mrs. Buttkiss — a woman who has been holding in her, uh, flatulence, for a very, very long time. [City AM]

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MONEY

More Money Monday Roundup: Sharing a Job & Avoiding Real-Estate Bubbles

Personal finance from around the Web:

  • Remember that bond-fund manager who got ousted from TCW in a dispute that, uh, reeked of pot and porn? Well, on Tuesday his new firm will be launching two new mutual funds. [DoubleLine Funds]
  • Despite recent job growth, the unemployment rate may stay high because many people out of the work force, previously too discouraged to even look for work, have started hunting for jobs again. [The Washington Post]

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MONEY

More Money Friday Roundup: Government Jobs & Recess for Adults

Personal finance from around the Web:

  • Unemployed? Consider working for Uncle Sam. The federal government will add more than 190,000 jobs to its payroll over the next few years. [Wise Bread]
  • A trip to the slums of India taught a rich, privileged New York teen how to change her spoiled ways. Read her account of the trip as well as her mother’s version. [New York Post]
  • Adults need playtime, too. A nonprofit CEO claims that companies would be more productive if they provided a “recess” for employees. [The Huffington Post]

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MONEY

More Money Wednesday Roundup: A Thrifty Trick & Big Bank Failures

Personal finance from around the Web:

  • Fearful of fraud? Of course, you are. In fact, it’s is a sign of successful messaging on the part of the IRS, which seems to make an annual push for publicizing tax fraud cases as the calendar year approaches April 15th. [Economix]
  • If you have ever been in a Southwest Airlines corral for seating, you will probably enjoy AirTran’s latest commercial, which takes the herd of cattle metaphor to a very literal level. [The Consumerist]
  • Never too big to fail: Former Federal Reserve Chairman Paul Volcker scoffs at the notion that banks should think financial reform will protect them from getting shut down. [AFP]

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MONEY

More Money Friday Roundup: Baby Denied Health Insurance & Endangered Bond Rally

Personal finance from around the Web:

  • The American consumer is apparently more resilient than thought. Spending has been on the rise since the second half of last year, and shoppers will likely keep shelling out through the end of the year. [TheStreet.com]
  • Experts such as fixed-income king Bill Gross think the glory days of bonds may have passed, but investors keep pushing their money into bond funds. [Bloomberg]

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MONEY

More Money Wednesday Roundup: Credit Scoring via Facebook & High-Interest Banking

Personal finance from around the Web:

  • Do you find yourself telling the kids to be careful who they hang out with? Turns out the same advice goes for you, online. Creditors are turning to your social networks to help determine whether or not you will make a good customer. [PC World]
  • The ever-capricious housing market defied economists predictions of a 1.9% increase in new-home sales for February, instead dipping 2.2 percent. [The New York Times]

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MONEY

More Money Monday Roundup: 10 Immediate Benefits of Healthcare Reform & Outrageous Traffic Tickets

Personal finance from around the Web:

  • You’re sick of reading about healthcare reform, of course. But now that it’s passed, check this list of ten immediate benefits for you and your family. [Crooks and Liars]
  • Forget about getting an early look at those Wall Street analysts’ reports: A US District Judge ruled Thursday in favor of complaints brought by several financial services firms against Theflyonthewall.com for publishing their investment recommendations before the firms could communicate them to their clients. [Yahoo News]
  • Proof that it is, in fact, not easy being green: Recent studies suggest that the eco-friendly consumer is more prone to “miserly” behaviors in other aspects of his life. [Green Inc.]
  • You’re not the only one feeling old at work. While to some it may be “just a number,” the EEOC reports a 17 percent increase in age-discrimination complaints made since the start of the recession. [Newsweek]

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