August 25, 2010
suitability has worked for 30+ years. i'm subject to fiduciary rules thru the corporate ria i use and it would be very expensive to adapt it to all my business. the money manager forms and disclosures which no client has ever read despite my urging are so voluminous and require so many signatures EVERY client throws up their hands and says "where do I sign?" ONE actually read much of the fine print in a VA prospectus and I was grateful for a nuance he caught which we hadn't discussed. Over disclosure is no disclosure and does nothing to ensure integrity.
I will probably be forced into running everything thru the ria on a fee basis and my clients who are buy and hold investors will pay more than they do now with A shares and infrequent intra-family exchanges. I will also have to spend a lot more time dotting I's and crossing t's which could have been spent figuring out and implimenting optimal solutions for real client objectives and concerns. with the possible demise of 12b1's i may have to go that way anyway and won't be charging 25bp's. I'll suffer and clients will pay more and my time to spent on behalf of clients will decrease.
it's simple math. if i need to incur extra compliance costs over and above the current defensive medicine already practiced at great expense by my bd and me, my income will suffer or clients will pay more or get less advice and thinking time since WE now have extra cost and time drains. I've never had a question raised let alone a complaint in my 34 years as a registered rep/broker/iar. If i cheated or decieved i'd lose my license(s),get sued, lose my EO, go to jail etc. supervisors, insurers, fund companies and money managers all care about honesty competence suitability and disclosure and more of it simply shuts down investors who trust me and rely on the fact that i don't control their money-i place it (with reputable sponsors who have controls) in vehicles that i explain in plain english which have some history.
forcing fiduciary responsibility does almost nothing to get better results out of underperforming and unimaginative trust departments who've "always done things this way" AND still HAVE UNDISCLOSED CONFLICTS, BIASES AND INCOMPETENCIES. Prosecute me and ban me for decieving, gross neglect or illegal activity, but otherwise let clients vote with their feet and be in a system where most time is focused on them instead of butt covering.