August 18, 2010
Letter to SEC
RE: File No: 4-606
Dear Ms. Murphy:
I am a financial planner, CFP(R) practitioner and an owner of the RIA firm Syverson Strege and Company. We provide financial planning advice for 324 clients with total net worths of over $500 million. Our firm manages over $220 million in investment accounts.
We have served our clients under a fiduciary standard of care for 13 years. I strongly urge you to extend the Advisers Act fiduciary standard of care to all financial professionals who provide personalized investment advice to retail clients.
It is unfair to consumers that the quality of advice they receive from a financial professional is dependent on the professionals registration or title. Its no wonder consumers are confused, and do not know whether their financial professional is looking out for their best interests. I can tell you from my personal experience that adhering to the fiduciary standard of care and putting my clients interests ahead of my own benefits my clients and my business.
The public prefers working on their finances with a professional that provides full and fair disclosure. The consumer should be able to easily identify the professional that puts their interests first and acts on their behalf at all times.
A financial advisor who provides comprehensive and continuous investment advice should be required to follow seven common fiduciary practices. They are:
Know standards, laws and trust provisions.
Diversify assets to specific risk/return profile of the client.
Prepare investment policy statement.
Use prudent experts and document due diligence.
Control and account for investment expenses.
Monitor the activities of prudent experts.
Avoid conflicts of interest and prohibited transactions.
These professionals must be able to answer to each client
How was their current portfolio allocation determined?
When was the last time the Investment Policy Statement was updated?
What type of due diligence was performed on the investment options that exist in the portfolio?
What are all of the fees and expenses associated with the various components of the investment program?
Consumers should expect and receive this level of service when they hire a financial advisor.
My clients recognize and understand that the advice I give them is in their best interests. My loyalty is to them first. I will advise them with utmost good faith. I will manage any conflicts of interests that may harm them and disclose those conflicts to them. I get paid for the advice I give them. I am required to choose from the best investments available keeping their interests first. I can charge a fee based on their needs and preferences.
Adhering to the fiduciary standard of care does not limit my ability to provide my clients with appropriate services and products. As a fiduciary, I can choose to operate in a business model that is best for my client. The key is fully disclosing, and avoiding and fairly managing conflicts of interest. Providing financial advice with fiduciary accountability does not reduce services to middle Americans. It insures that the services consumers receive will be in their best interests -- not in the best interests of the financial intermediary or his or her company.
I urge you to recommend to Congress that it is necessary and appropriate in the public interest and for the protection of consumers to extend the fiduciary standard to broker-dealers, who provide personalized investment advice, and to initiate a rulemaking to achieve this long overdue consumer reform.
David G. Strege, CFP(R), CFA(R)
Syverson Strege and Company
West Des Moines, IA