August 16, 2010
I have worked in the financial services industry for almost 50 years. I started as an assistant training director, quickly became a financial advisor (Registered Representative), and was the training director and head of human resources at a major broker-dealer. While in my various management positions I continued to serve as a registered representative handling retail accounts. I also worked at the New York Stock Exchange managing what is now the Series 7 exam and serving as a consultant to member firms on training issues. Some 35 years ago I went into business providing sales, sales management and product training to the securities industry and then after the demise of Glass-Steagall to banks, product providers and insurance companies. Over the years we have worked with many thousands of licensed people to help them build their business through enhance knowledge and skills.
I understand that a fiduciary standard imposes a legal liability that the suitability standard does not. Having said that, we have always trained people to act in the best interests of their clients and disclose all material conflicts of interest. We think this is best done by focusing on a suitability standard to ensure that products meet clients needs and timelines.
In the practice of most Financial Advisors these two standards blur. My experience suggests that the most important thing is to function in the interest of the client by looking at investments from the investors perspective. The best people in the industry who survive and thrive, up markets or down, have always operated in the best interests of their clients. They may not always be correct with their advice but they will always put the investor first.
The new rule should provide one standard for anyone giving investment advice, particularly since most financial advisors are both brokers and advisors. Broker-dealers who only take and execute orders should be exempt. There are always investors who want to make their own decisions. When I handled accounts I often sent a letter of non-solicitation when I felt that an investment was not suitable and in the best interests of the client.