Here is proof that readership of newspapers is going down.
The Milwaukee Journal Sentinel called a few weeks back about a Wisconsin legislative bill that sought investment freedom for cemetery trust funds. With the legislative battle that was waged a year ago in Wisconsin, we had expected the bill might represent a renewed effort to allow common ownership of funeral homes and cemeteries. But instead, five Wisconsin legislators are sponsoring a proposal that would allow Wisconsin cemeteries to bypass fiduciary institutions and allow their trust funds to be administered by broker-dealers. The lead sponsor commented to the newspaper reporter that “It’s really not a big deal. Cemeteries are already investing with these folks.” The sponsor indicated that he introduced the bill at the request of a stockbroker who had been investing a cemetery’s funds for years without knowing he had been doing so illegally.
Death care operators should take note that the duties of the “fund manager” differ as between a broker-dealer and a registered investment advisor (RIA). As explained in the SEC’s 2011 “Study on Investment Advisers and Broker-Dealers”, while the RIA has a fiduciary duty to know his client, the broker-dealer does not have such a relationship unless the circumstances dictate otherwise. The broker-dealer is only required to make recommendations consistent with the customer’s interests. Ask any RIA if the difference is important. But, the Wisconsin cemetery bill underscores the duty that is missing from both RIAs and broker-dealers: the duty to comply with the laws applicable to the client’s trust fund.
The OCC made this duty known to federally chartered preneed trustees more than 10 years ago. But, a broker-dealer has no duty to stay up on Wisconsin’s Chapter 157. It makes you wonder whether the sponsors of Assembly Bill 79 were staying up with the troubles of the Wisconsin Master Trust.
But then again, that trust did have a fiduciary.