August 24, 2010
The Fiduciary Standard is important for an Investment Advisor that has discretion over a client's assets because that Advisor will be making ongoing investment decisions/changes for the client over the long term. The suitability standard for Registered Representatives is appropriate for investments that are purchased by a client from a Registered Rep. A fiduciary standard for an investment purchase is not necessary because there is a reduced ongoing relationship with the advisor as the Advisor does not have any power/authority to make investment changes unless the client first approves the changes and there is a series of signatures that are required on compliance forms in order to make the investment changes -- compliance departments at broker/dealers review every transaction made by Registered Rep's. Further, the Advisor is paid up front for the time developing the client's portfolio and advising the client on the appropriate/suitable investment products and strategy. There is a minimal ongoing servicing fee (12b-1) for the time the Advisor spends servicing the client through an annual review and phone calls to the Advisor and staff for administrative support (withdrawals/address changes/beneficiary updates/questions about investments and performance). No fiduciary services are being provided under the role of a Registered Rep. Thus, there is no need for a Fiduciary Standard. It is not an appropriate fit to require a Registered Rep to act as a Fiduciary, which is the highest standard of care, and appropriate only for an ongoing Advisory relationship. Investment Advisors do not have to have client approval to make investment changes -- no compliance forms need to be signed to buy/sell an investment because of the Investment Advisor's discretionary relationship over the client's account(s). Investment Advisors can and should act as Fiduciaries due to their ongoing position as having discretion over the investment decisions on an ongoing long term basis. Thank you for considering my comments in this very important process.