July 30, 2010
I am strongly opposed to the SEC imposing a "fiduciary standards" requirement on broker dealers. I have been involved with the insurance and investment business for over 20 years, and am proud to have served my clients well through both good times and bad. I've never had a complaint or lawsuit during that 20 year period.
We are already extremely heavily regulated under the current system through FINRA. I would suspect that we are much more heavily supervised than the existing fiduciaries under the fee based/fiduciary model that most RIA's operate under. In addition, it is not our industry, nor was it our approach that was responsible for the recent economic mess. My fear is that if such a standard is imposed, it will only increase the incidents of frivilous lawsuits, and increase the costs to run our business, which will be passed on to our clients. Ironically, I also believe this will result in less financial advice being available to clients who don't have the resources to pay for services through a fee. About half of my business is in the life insurance arena. These products are sold on a commission basis, and thank goodness they are. I've paid many death claims to clients who would never have owned the proper amount of life insurance if left on their own. Most fee based plans I see have recommended life insurance, but for some reason or other it never got implemented.
As I always tell clients, you can receive good or bad advice whether you're paying a fee or a commission. You can't regulate incompetence or dishonesty. Most brokers and agents are providing sound advice for their clients, and a change such as the one being proposed is unnecessary and will be potentially harmful to everyone involved. Studies show that most clients are happy with their agent or advisor.
The advisors who are not acting in an ethicial manner are not going to start acting ethically because you change the law. They're breaking current ethical standards, and are not going to change. You shouldn't punish 99% + of the people in our business which is working well to try and constrain the under 1% who are pushing the envelope. If I'm not mistaken, Bernie Madoff was a "fiduciary". We all know how that worked out.
Thanks for your time.
Gerald S. Haynie