August 9, 2010
There are many concerns regarding this topic. Compliance is already a complicated, time consuming issue. I hold licenses in life/variable products as well as the Registered Representative (RR). Each year my company holds training sessions and we are required to take annual exams as well as the online tutorial every 3 years - these are in addition to the CE's required by our state licensing department and all of the training for the other product lines. Maintaining the correct files and doing client reviews often enough, plus all the new training for my other licenses (health, LTC, property casualty, disability, annuities) requires substantial time commitments already. While I do not object to any of the above, I am laden with many extemporary activities in order to provide the level of service required by the licenses. These hours directly impact my ability to serve my clients due to the huge time drain.
Hence my concern about a fiduciary versus the suitability standard. The fiduciary standard looks back and enforces breaches through SEC enforcement or private lawsuits. The suitability standard looks forward and tries to prevent harm to consumers through ongoing and frequent FINRA and broker-dealer audits and compoliance processes.
As an industry we are already heavily regulated. I believe that those of us who strive to always provide the highest levels of service, product information and adequate suitability for our clients are regulated enough. In your consideration of the fiduciary standard, please tell me what is 'best'? Would that be measured by historic underwriting, service standards, price (as in cheapest), premium relative to the benefit of a product, or perhaps the rating of the company providing the product? There are too many interpretations of such a standard and in essence it adds a vague legal liability standard that looks back and is enforced after the fact by the SEC or trial lawyers who have perfect vision in hindsight
I know how much 'free' time I provide already to my clients since I choose to not be a fee based planner. My goal is to provide the 'best' products, information and evaluation of my clients' many suitablity factors and issues. The potential for significantly increased liabilities will preclude many potential professionals from ever entering the business and I fear many in my experienced group (career agents) will not wish to continue in a vastly greater legalistic environment. The cost of E O insurance alone could drive many out of business.
Please consider that while it is unfortunate there are 'bad apples' in the barrel, most of us work hard to provide the very best of what we have to offer to our clients. Do not regulate the industry based on their actions vs. the majority who truly care about what they do and the clients they assist. Thank you for your time.