August 24, 2010
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.
o I currently spend at least 30 hours per year in educational and compliance training. I am examined by each of 13 Medicare companies that I represent at least once per year. I am also examined by the annuity companies I represent at least once each year.
o I spend at least 3-4 hours out of every week on compliance. A great deal of paperwork is involved. Every one of our 7 full time staff have to spend 3-4 hours each week to help keep up with compliance.
o Many of these do not add any consumer protection in my view
o The compliance requirements take important time away from impacting my ability to serve my clients?
Adding fiduciary duty to registered advisors and representatives would cripple many and cause them to leave the business.
o Others would be forced to a fee only model to protect themselves from liability, and will certainly not result in better, unbiased advice.
o Many of their clients cannot afford to pay up front fees or would not be willing to.
o The liabilities will also drive up their errors and omissions coverage.
o Many will not stay in the business if liabilities become too great.