“How would you like your business card to read?” the office receptionist asked.   “Francis Patrick Boland,” I answered.  It was an outlandish statement on my part.  Everyone around me had a nick name.  I did not.  But then I wasn’t an upper-class Boston Brahmin. “Might as well put my Irish heritage up front,” I thought.  It was the spring of 1965 and I was a new stockbroker at Estabrook & Co.

The firm was located at the top of State Street (the Wall Street of Boston) within ten yards of the site of the 1770 Boston Massacre. The firm’s mailing address was P.O. Box 1.  It was a world where I would meet people who had Massachusetts cities named after their families.  Quincy, Lowell, Peabody etc.  I remember meeting Myles Standish, a portfolio manager at American Mutual Insurance.  And he was.

At the time, Estabrook & Co. was a private partnership.  As such each person was personally libel for any shortfall in the transactions of the partnership.  Since one was libel, risk was taken very carefully and well managed.  That changed dramatically in 1970 when a member firm, Donaldson, Lufkin & Jenrette, went public.  Risk was thus transferred from the partners to the new stockholders.  Not surprisingly, most of the other member firms subsequently went public as well.  A bonus system replaced the “It’s my money and my risk” form of compensation.  That would have major unintended consequences.

The Boston Brahmin culture became transformed forever five years later.  On May 1, 1975, the Securities Exchange Commission mandated the deregulation of fixed commissions.  It changed the brokerage business from a non-competitive gentlemen’s “club” to a transaction business.  With that change, broker self-interest (making as much money as possible) came to the fore.

The transactional nature of the brokerage business began a perpendicular ascendency seven years later when Paul Volker cut Fed Funds.  His action gave birth to a 35-year secular bull market in bonds that allowed brokerage firms to hide outrageous commissions in an opaque market.

The repeal of the Glass-Steagall Act in 1999 created even more commission opportunity.  Glass-Steagall was passed following the crash of 1929 and separated investment banking (underwriting securities) from commercial banking (lending money).  Its repeal would facilitate the debt crisis.

The solution this time was the Dodd-Frank bill.  The bill has   over 22,000 pages written in its creation detailing what can or cannot be done by financial institutions.   After 50 years of regulatory change to the brokerage industry do you really think the situation has improved?  It’s still conflicted.

Unlike the brokerage business, the investment management business has a simple fiduciary standard of behavior.  It’s based on the Harvard College v. Amory (1830) “prudent man rule.”  People managing money for other people must look after the money as though it was their own.