John Taft of WSJ’s Wealth Adviser discusses fundamental reform issues that remain, particularly when it comes to the ethics and culture of the financial industry, including the fiduciary standard of care.
Excerpt: There are a lot of milestone dates used to mark the failure of the financial system. But the milestone that most affected my clients was the breaking of the buck of the Reserve Primary Fund, the largest money-market fund, on Sept. 16, 2008.
Breaking the buck happens when the net asset value (NAV) of a security fund’s portfolio drops quickly and the total value of the securities drops below $1. When you break the buck, it’s a big deal because investors lose money on what should have been a very safe investments. It would be the equivalent to having $100 in the bank, going to withdraw it and the bank saying sorry we can only give you $97 back. Now more than five years later a lot of reforms that have taken place, but there is still much left for advisers and the financial industry to accomplish.