July 27, 2010
In 1994 I became a Registered Investment Advisor in Illinois with a national filing with the SEC under the Investment Advisors Act of 1940. Later, registration rules allowed advisors with lesser assets under management to be state-only registered. In 2001 I accepted the position of consultant to a bank in central Wisconsin and later accepted the position of manager of their investment services department. This position required my registration as a series 7 broker. Due to my experience with registrations under both the advisor and broker designations, i believe I am uniquely qualified to provide insight into these two similar, but different financial services careers.
The growth of regulation and compliance procedures in the last decade have presented both confusion on the part of the client, and irritation on the side of honest hard-working professionals. Historically, regulation has not prevented corrupt agents or financial services firms from acting in their own best interests. The best deterrent from illegal activities is the resultant loss of income and a career, not the threat of incarceration. It is unfortunate that the growth of regulation has added several layers of costs to the final end user while not significantly improving the service provided them. Additionally, this growing regulation is preventing new entrants into the marketplace, particularly the small business owner. SIMPLIFICATION would be the best answer.
It has been my experience that stock brokers and investment advisors are seen by the general investing public as basically being the same. Under the fiduciary standards of RIA's , this could not be further from the truth. In my conversations with compliance directors of brokerage firms, they admit that the broker regulations allow more leeway regarding a broker's committment to their client, whereas an advisor's role is better defined and more restraining. Brokerage firms have consistently taken advantage of this internal distinction by manipulating their commissioned sales force particularly in the sales of in-house funds and products with higher payouts. The facts are readily apparent and available for examnation.
I would be more than happy to testfiy before any committee regarding my years of experience in the financial services industry and answer any questions.
Thank you for your efforts.