August 10, 2010
Compliance costs, both in terms of finances and time, are very high at the present time. And these costs are felt by my clients. Adding additional layers of regulation means more compliance and more costs to client since it will cost me more to operate a business.
I have held Series 6, 22, 63, 7 securities licenses for 28 years. My broker dealer already imposes a tremendous amount of compliance on any securities related transaction. My office is examined continually by my broker dealer. Our office has a full time compliance officer and staff. The client paperwork involved for me and my staff is overwhelming now. Further regulation would necessitate hiring an additional person. My errors and omissions coverage will skyrocket. This would add to my overhead and would begin to cripple my business.
The idea of going to a fee model is ridiculous and will damage our profession as financial advisors. No clients like paying fees. In fact, they hate it. Fees will not guarantee objectivity. Only success allows an advisor to be objective with advice. Thus, clients will either not seek advice or they will seek the lowest bidder. Long time, established, successful professionals in any field are never the lowest bidder. And never will be.
The professional associations that I am a member of all have ethical codes of conduct that we must abide by. That is over and beyond the ethical guidelines that my broker-dealer imposes, which I contractually must follow.
Know this. If the SEC imposes additional regulatory scrutiny, the United States will begin to see the same results as the UK, Australia and New Zealand have experienced: a dramatic loss in numbers of financial advisors. So, even more people will be without proper financial advice.
Further, licensed securities reps will just give up their securities licenses and market fixed, insured products. And they will simply exit the advisory business. Are these the type of unintended consequences the American public wants? I don't think so.