July 1, 2009
I would like to offer my opinion on proposed custody rule (IA-2876). This rule would place an undue burden on small financial advisors who use third party custodians. The cost of an annual audit would drive up costs for fee only advisors and consequently hurt consumers when the costs are passed along. I’m at a loss to determine what benefit if any this will have for anyone. We use TD Ameritrade as custodian of client assets. They are audited extensively. This would encourage advisors who offer their clients the safe guard of a third party custodian to hold custody of assets themselves. If you’re going to have to pay for an annual audit anyway, why not custody the assets yourself?
When we take our fees, if they are above 3% of the account’s balance we are prompted for an explanation before we can continue (we charge no more than 1% of AUM per year but we may take the fee for a client’s different accounts from one account). This rule would be redundant and oppressive and will only serve the accountants who receive the audit business. This is a misguided attempt at regulating small advisors during a time when the SEC should be focusing on the causes of the problem, large firms posing systematic risk to the economy.
Kerry G. Mayo, CFP®
Capital Financial Advisors of New York, LLC