August 12, 2010
I am writing today as an investment advisor representative to voice my concern over the possible new "standards" we may be held to. First of all, the regulatory standards that are already in place are quite rigorous. As any of my clients will attest to, just to fill out a single application for a securities product can take up to an hour. Not only do you have the company application and suitablility questionaire, but you also have your broker/dealer account forms and questionaires. Then once the app is taken it is then screened by your OSJ and then sent on to the broker/dealer where it is screened again. If the sale is deemed unsuitable by either one of them, they won't send it on to the company.
In addition to all of the upfront supervision, we are required to do annual continuing education and attend (in person) an annual compliance talk. We are also subjected to an audit once a year and many times an additional surprise audit. All to make sure we are doing the right things for our clients. I am willing to be subjected to this because I believe that what I do truly helps my clients and that they do need to be protected from those agents out there who don't have their bests interests at heart.
By requiring these new standards, you will be hurting my clients in two ways. First, becuase there will undoubtedly be more lawsuits there will have to be greater fees passed on to my clients. Secondly, the new regulations will cause most planning to be fee based, which is normally a far less economical way to invest for those who are only able to invest small monthly amounts. It won't affect high net worth clients as most of their planning is already fee based. So again you are actually hurting those people whose money means even more to them because they have much less of it
Finally, the new regulations are so ambiguous that there is no way they will not lead to a huge increase in law suits. It is easy for a judge or lawyer who is not in our business to represent a client who lost money in an investment or had a falling out w/ their advisor to say "you didn't put them in the "best" product available". Well what is the "best" product out of the thousands available? Is it the one with the lowest fees or the best guarantees? Should you use company A or company B, or C? There are already so many options and products there is no possible way to go through them all. It would lead to paralysis by analysis and cause advisors no matter how much research they have done, to wonder if they are going to be sued because you didn't put your client in the "latest greatest thing" Is it our job to keep up on the newest products in our industry? Of course it is, that is why our clients come to us. But we have to be allowed to be confident knowing that we are able to choose a handful of highly rated companies and allow them to compete against each other for our clients business and not be second guessed by a judge for doing so.
Thank you for your time and I hope and pray that you will do the right thing for my clients and for me, and leave the current regulations (which are plenty strict) in place.