August 6, 2010
I am a registered representative and have been series 7 licensed since 1970.
Imposing the level of fiduciary standard suggested in the current legislation will present some significant problems for me and my business. It will be very expensive. It will cause my liability coverage to increase for me and my staff.
It will cause me to do incredible amounts of unnecessary work to prove I have met this standard which is unneeded.
I can not afford to be examined by auditors on a regular basis. So how will I prove I have met the standard? We already spend nearly $1000 per case on compliance now, filling out the paperwork required by the broker dealer and submitting all of the forms our clients have to sign. I have one fulltime person dedicated to tracking all of the current compliance issues now. This will be an additional burden.
The idea of going to a fee model is ridiculous and shows there is no understanding of the marketplace. Fees do not guarantee objectivity. Only success allows the advisor to be objective in their advice. The more financial pressure the government puts on the Reps, the more fees they will have to charge. Clients HATE fees. They will either not seek advice or find the lowest bidder. We know that neither is in their best interest.
Being governed by an ethical code is sufficient to cover the basic behavior of advisors. In addition, there is already in place significant monitoring from Broker Dealers and a plethora of forms and questions that are asked to protect the client. What more is going to be gained by going this additional step?
All that will happen is more jobs will be lost as advisors bail out of the SEC/registered rep world and go back to marketing fixed products which are not as heavily regulated. That does no one any good.
The list of unintended consequences will be long if the SEC pursues this course of action. I hope sanity will prevail before the SEC totally disrupts the retirement planning opportunities for millions of Americans because they will have no one to serve them.