August 31, 2010
I encourage the SEC to adopt policies and procedures that require high standards of knowledge and client care for professionals in a financial advisory capacity.
I have been a financial professional for 42 years, a CFA for 36 of them, and I have learned that most individuals fully expect that their financial advisor has the clients' best interest in mind. Unfortunately, we have discovered too many times that is not the case.
If there is a choice between a suitability standard of care for clients and a fiduciary standard of care, I would encourage the adoption of the fiduciary standard since that is what most clients believe they are getting anyway.
I would also encourage adoption of procedures requiring the disclosure of all potential conflicts of interest, including compensation arrangements that benefit the advisor if their client uses certain products or funds that they sponsor. There is no natural incentive to make these disclosures for the advisor, and no easy way for the client to see how their advisor is compensated without sophisticated research undertakings.
We need to promote a climate where advisors fully comprehend the true meaning of risk and return, are reqired to demonstrate that knowledge, and disclose all compensation arrangements to clients.