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A class-action lawsuit in California centered around the concept of ‘reverse churning’ continues. Focused on Edward Jones and their policy to shift away from a purely commission based fee structure (much like the rest of the wealth management universe), plaintiff lawyers have invented new ways to piss everybody off.

The case and the nature of the allegations connected with so-called reverse churning kicked enough dust that FINRA had even taken up the issue and began discussing it at industry events and internally.

**A quick word about reverse churning. The idea that the industry has touted fee-based accounts for a decade plus and now are potentially being raked over the coals for it is ridiculous. If you happen to be keeping score as it relates to regulators – commission based accounts are bad, and now fee based accounts are bad.

Still, one wonders who really benefits from this case being dismissed? Are brokers entitled to some sort of celebration based on relief from increased scrutiny around fee based accounts? Or is it wealth management executives that pushed advisors away from commission based practices that can claim victory? We aren’t so sure.

The upshot should be that advisors should be given the trust they are do to rightly manage client accounts and the costs associated with those accounts until they run afoul of the law. Bad actors will always exist whatever regulatory structures exist, and the law is nearly undefeated in catching them at it. Picking and choosing the ‘most right’ way for clients to pay for the advice, services and care that advisors give them should be up to clients.

This win for Edward Jones feels like a net-net public good for advisors at large. Let’s hope FINRA reads the verdict and opinion and acts in accordance with it.

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