August 28, 2010
I am writing this because I disagree that a fiduciary standard for Broker-Dealers and Registered Representatives will provide better protections for the consumer. I have been a Registered Representative for a Broker-Dealer for 12 years. I currently hold a series 6, 63, 66, and series 7 license along with life and health. I have seen compliance increase four times the current levels that happened when I got started. My office has a full-time Compliance Officer that is consistently reviewing our files, training us, and making sure that we are doing what is in the best interest of our clients. When I got started compliance was probably taking up 5% of my time. Now it is taking 25% of my time, more classes, more money, and more time spent with clients to make them aware of all the new disclosures that have been added over the last ten years. Now you are considering adding another layer of compliance to an already heavily regulated area? It will get so time consuming and tedius that you run the risk of losing honest, caring, and experienced people like myself because we will be spending even less of our time helping clients and prospects save and protect their money. 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.
If the fiduciary standard is passed will the liabilities drive up our errors and omissions coverage? Will I be able to stay in the business if liabilities become too great? The Dodd-Frank Act permits the SEC to require that all broker-dealers be held to the same legal fiduciary requirement investment advisers have when providing advice to clients. Should the SEC choose to use that authority, the fiduciary duty as defined by the Dodd-Frank Act would require that all broker-dealers be held to a legal and vaguely defined standard "to act in the best interest of the customer without regard to the financial or other interest of the broker, dealer, or investment adviser providing the advice."
While I believe we are already acting in the "best interest" of my clients, the Act does not define what the rules are for compliance with a legal "best interest" standard - thus subjecting me and other registered representatives to the potential of never ending lawsuits. For example, is "best" the cheapest recommended product? The "best" premium relative to the benefit of the product? The product with the "best" historic underwriting and service standards? Is it the one from the carrier with the "best" rating? The fiduciary standard in essence adds a vague legal liability standard that looks back (sometimes after many years) and is enforced after the fact by the SEC or trial lawyers who have perfect vision in hindsight. In other words the liabilities will be way too high to be able to keep us in the business, less clients will be seen because of another layer of compliance that is definitely not needed(we are regulated to the hilt), and not being able to have the ability to match the client with the right products and plan will make this an impossible situation and miserable profession. I ask that you not put a fiduciary standard on Broker Dealers and Registered Representatives because it is not needed and it definitely will hurt our industry.
Russell R. Dart