June 30, 2009
I am a Certified Financial Planner (TM) and a member of the Financial Planning Association and am writing in reference to the proposed regulation requiring annual audits by accounting firms of those advisors that who debit their client accounts for management fees.
This firm and its members act as fiduciaries and hold ourselves to the highest of standards in order to protect our client's and their financial assets and retain their trust. This proposed action seems to be highly reactive to make up for the lack of proactive policies. With the economic crisis we've seen over the last few years and the lack of confidence in the financial system as a whole, I understand the fear and apprehension that my clients have expressed to me. I understand their knee-jerk reactions and wanting to take their money and put it in a mattress for safe keeping. While not logical or productive, I get it. To see the SEC making plans for such a ruling is not something I understand, and more disturbing, it is coming from those who should know better.
More regulation isn't always the answer. Many times, firm implementation of existing policies would solve many of these problematic situations. The Madoff scandal could've been undone by SEC auditors simply paying attention and putting the client's interest first. The information was there. The people were there. It wasn't so buried and disguised that it couldn't be seen by the SEC and FINRA who should've seen it. If it wasn't seen, to me, it should've been seen and is equally offensive. The SEC simply cannot save face by implementing overly burdensome regulation as a public relations band aid over the wound created by Madoff, his firm, and FINRA's inability to act appropriately.
We are a small firm and adding the proposed regulation will severely hurt our ability to function. I am by no means saying that regulation that would clearly benefit the client should not be enacted because of the cost. We already have done many things here to benefit the client that have come at great cost. Compliance manuals don't come cheap! I would support the hiring of SEC auditors and the enforcement of more frequent audits to ensure the public's safety from the rare rotten apple. I think the public (RIA's included) have had enough punishment for the lack of ethics of others. This action neither enhances the safety of my clients nor prevents another Madoff. Frequent and tough audits will be the remedy that is needed to discourage the next Madoff and see to the safety of those who are our clients.
Scott Whytock, CFP®
Aurora Financial Group, LLC