August 11, 2010
Re: Fiduciary Standard on Registered Representatives
To Whom It Concerns:
Thank you for taking on this study of our industry. I welcome any further questions or input you may desire.
The suitability standard governing broker-dealers and registered representatives is a robust and heavily enforced standard. Compare and contrast it to how you see the fiduciary standard governing investment advisers is applied and enforced.
Compliance costs-both in terms of finances and time - are high, and those costs are eventually felt by clients. Adding another layer of regulation means another layer of compliance, and even more cost to clients.
I have insurance licenses in multiple states as well as strict compliance requirements as a FINRA registered representative. I spend considerable time each week in complying with each such license just at this point in time
Specifically, I spend approximately one full day per week (or someone in your office) on compliance. Paperwork, bookkeeping and monitoring is involved far beyond that a prudent person would spend in maintaining suitability standards which are both ethical and effective for the client's best interest
There areas of compliance that do not add substantially to any consumer protection
Current (non-expanded) compliance requirements impact your ability to serve your clients by taking away vital time which could be spent contemplating, proposing and implementing suitable plans for my clients
Fiduciary duty could mean costs in excess of both time viability as well as profitability necessary to ably serve your clients.
Moving to a fee-only model will not result in better, unbiased advice perhaps if someone has not had any complaints they can be exempt from this model
I may even be forced to a fee only model to protect yourself from liability
My clients cannot afford to pay and will not pay up front fees
The potential for liabilities will almost certainly drive up your errors and omissions coverage
In fact, I may be forced to exit the business if liabilities become too great as a simple business decision.
Sincerely,
Lawrence Thaul