July 30, 2010
I have mixed feelings on the impact of Dodd-Frank
Compliance costs-both in terms of finances and time-are high, and those costs are eventually felt by clients.(especially the little guy) Adding another layer of regulation means another layer of compliance, and even more cost to clients.
o I hold both Insurance and Securities licenses, Series 6,26,63 and 65
o Every year my office is examined by either the CT Dept of Banking or FINRA in addition to my Broker Dealer.
o My staff and I spend many hours monthly keeping current and executing required compliance documentation. I have been in the business for 30 years and now spend un countable hours completing forms and paperwork which were unknown in 1979. To open new accounts it often takes up to 50 + pages and then copies for the clients and the home office (that is 150 in total). I cannot guess the hours the staff at the OSJ must spend on all of this.
o In over 30 years in practice I have never had a complaint. I document all my client communications and have always maintained copies and records for their benefit as well as mine. Forcing me to do more is only going to compel me to work with larger clients and cases as I cant spend the time with a small client and expect to be compensated.
o The little guy ends up with the short end of the stick. Some time ago I stopped serving
o those with small accounts because trading costs, ticket charges and time were costing me more than the commissions paid.
o If you reduce the 12b1 fees it will even further reduce my motivation to serve the smaller client.
o Many clients cannot afford to meet the minimums of a fee advised relationship. My practice has been built on the Golden Rule and I learned a long time ago what goes around comes around. Doing what is best and right for my clients helps me gain more clients. Therefore I feel I already practice with a fiduciary method. I use both suitability standard practice and 1940 Act business. Both are appropriate when applicable on a case by case basis.
o The little guy (less than $100K) will lose if I am forced to a fee only model to protect myself from liability.
o Many of my clients cannot afford to pay upfront fees and are not willing to.
o The cost of my errors and omissions coverage will go even higher.
o I am close to retirement and my biggest fear is for the new people entering the business. I see fewer and fewer young advisors. Many enter and few stay. Young families are under served and need our help even more than my generation. Must a few bad apples spoil the world for those of us in ethical practice? We are all now painted as liars and cheats. This hurts me even more than the regulations. I have a large peer group who all practice with high standards. You will force many out of business if you over regulate us.
David T Wilson