August 7, 2010
I am totally opposed to bringing any level of fiduciary standards on broker-dealers and registered representatives. As a FINRA registered representative I am already over regulated. The addition or replacement by SEC will cause my costs to sky rocket. Right now regulations control everything I do from what I say on my business card, to what I must have in my office records, to what I can say verbally and electronically with clients.
Regulations have actually reduced effective communication between the registered rep and the client. The way it is now we try to say as little as possible with clients because of the concern over the more you say the closer you get to breaking some silly rule. Is that in the clients best interest?
The end result of the vast regulations we already deal with is this: we actually end up thinking more about abiding by rules that what we should be doing for the client. Is that in the clients best interest?
The SEC and fiduciary standards will make this worse.
We have annual compliance audits that FINRA forces our broker-dealer to perform. This takes us 40-50 hours per year just to prepare for this audit. Then we get actual FINRA visits the auditor stays 2-3 days. Regulations add complexity and expenses.
Moving to a fee only model will not remove bias from the scenario. While high end clients might look favorably on fees, the vast majority of people that need education and guidance will not ultimately be willing to pay for it. In the end the majority of the market will be un-served by this move as:
Clients will not pay annual, or upfront fees so they will go without guidance
Registered reps will drop their registrations.
As it is right now, I am ready to move totally away from holding a Series 7. Bringing fiduciary responsibility to FINRA broker-dealers and registered reps is a bad idea.