August 2, 2010
I am a consumer and also a registered representative. It is important to examine a few issues related to regulation of broker-dealers and investment advisers that directly affect consumers.
In order to maintain the proper licenses required of a registered representative, many hours are spent each year in continuing education, training, and case studies all of which are indirect costs to serving consumers and doing business. Direct costs include licensing and CE course costs. Primary point Compliance costs under our existing regulation is very high (in terms of time and finances) and all costs ultimately are borne by the consumer. More layers of regulation = more layers of compliance = more costs to consumers.
I hold Series 6 and 63 licenses. Each year I must sit through on-line training that absorbs 8+ hours of my time. In addition, I attend a meeting to review 'best practices' in maintaining all compliance standards as set forth by our governmental regulating entities. In order to make certain that licensing and compliance are up to date, I have a staff member attending to these functions. In addition, I must sit through a "formal" testing process at an approved testing center every three years to affirm that I continue to be up to date and cognizant of accepted consumer protections and ethical behaviors. Finally, written/email updates are sent regularly to provide examples of incorrect behavior and the consequences that follow, as well as to stay abreast of the changing rules, procesures, and practices of the financial services industry.
It a commonly held ideal that annual reviews should be performed with clients in order to stay current and provide the best level of service. The fact is that the current existing regulatory requirements already take away valuable time from clients. Imposing more will do nothing to help clients on the contrary it will cause competent advisers to question their career in this industry.
On the subject of a "fee only" model, I say simply that doing what is in the best interests of the client is paramount - no matter the compensation model. My goal must always be to do what is best for my client. If I choose to ignore that basic premise, then it does not matter what model I work under, the result will be onerous to my client. A real concern over a fee-only adviser model is that this tends to exclude the 'middle class'. Advisers focus on those cients with sufficient assets to justify/pay their fees. A commission model makes advice available to all ptential investors, regardless of asset base.
Thank you for the opportunity to provide comments on this important topic.