July 6, 2009
While I understand the reason for this step in situations where the advisor has direct custody of client assets given the potential for abuse, I believe that the application of this same standard to advisors that custody assets through an independent 3rd party custodian and charge fees directly to discretionary accounts is a significant and misguided overreach.
The purpose of utilizing an independent 3rd party custodian is to provide separation of control of the assets along with an independent client statement listing all positions including fees charged. Implementing this measure will result in an increase in cost to RIAs that will in turn be passed on to clients in the form of an increased fee while adding no real value for the client.
We, like many others commenting on this proposed regulation, have taken the steps to align our practice and business operation with the interests of our clients (as fee-only RIAs). With so many real issues facing this industry, it seem that, rather than burdening those advisors that have taken steps to do things right, it is would be more prudent for the SEC to focus its key resources on areas that do add real value by cleaning up the predatory sales and “advisory” practices that have given our industry a real black eye.
Jim Loquai, CRPS®, AIF®
Excel Financial