August 25, 2010
I am writing to comment on 4-606. I operate in "both worlds" now in my practice. I am Series 7, 63 and 65 and am both a Registered Representative and an Investment Advisor Representative. In both world, the standards imposed by my broker-dealer are more stringent than the fiduciary standard that I have to operate under as an Investment Advisor. I am regularly subject to inspections and reviews by a number of entities including my broker-dealer, the state(s) in which I practice and FINRA. Approximately 15-20% of my time is devoted to compliance training, continuing education and the everyday tasks of determining the suitability of every investment or insurance product I recommend for my clients. Additionally, E & O insurance premiums, the cost of the licenses and testing (yes, I have to pay for some tests), and the costs of continuing education are taking an increasingly large bite out of the diminishing commissions and fees that I have experienced over the years.
I see no gain for any of the clients I have helped over my 30 years in the business. My clients are well educated by me about the choices they have between investing in products that pay me commission and investing with me on a fee basis. Since I have no proprietary products to "push", I feel that the advice that I give is as fair and good as my clients will find. I don't sell to commission. My success has been selling to need. My clients know that I treat them like family. If a Financial Representative treats his clients any other way, he cannot stay long in the business. I have also found that the overwhelming majority of people that are the "under $250,000 a year folk" would much rather invest in products that pay me a commission as opposed to paying fees out of their pocket.
In my years in this business, the standards under which most advisors operate have become much more stringent. They have become almost draconian. I have explained to several of my clients that the rules that my clients feel are silly are there to protect them. What they do not understand is why all of the oversight by our broker-dealers is necessary. Some of my clients have even felt that the compliance requirements of my having to gather so much suitability information is insulting to them. I have had more than one client comment that FINRA (whoever they are) must think they're stupid and they resent it. They have a hard time with the idea that their advisor (me) who has always done the right thing by them has to fill out virtual books of forms in order to prove to a compliance department that he's not making inappropriate recommendations for them and that they aren't stupidly or blindly buying financial products that are bad for them.
I urge you to leave well enough at this point. Speaking for the small percentage of the population that my clients represent, and for myself, we have more than enough rules in place now. Imposing the same fiduciary standard on all financial professionals would be harmful, expensive and counterproductive.
Matthew Brashinger III, LUTCF, CLTC