Subject: File No. S7-06-04
From: Douglas K. Hollen
April 4, 2005
Mr. Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth St, NW
Washington, DC 20549-0609
RE: SEC Proposal on Point of Sale and Confirmation Disclosures
Dear Mr. Katz:
The SEC serves to protect the investor from two groups of people – bad brokers and the investors themselves.
We all know the bad broker stories, and there should be regulations to remove them from the industry. But, good Financial Advisors help clients! Study after study shows that average investor returns are only one third of the return on most Mutual Funds. Why is that? They chase their tail by buying last year’s winners and getting in and out of funds at the wrong time, etc.
With that in mind, why must the SEC make more confusing, complex and costly paperwork? That serves only to punish the good Financial Advisors, confuse the client, and focuses the client purely on cost. Making the paperwork process more complex and more costly while driving the fees lower only serves to enlarge the number of clients needed to support a practice. The larger the number of clients required, the more limited and less personal the service.
My business model is to limit the number of clients so that I can help them. In good markets, I help them not to chase the rainbow and stay focused on balanced asset allocation models. For example: Avoid “tech” in 1999. Then in bad markets I help them stay the course and not to sell out. For example: Don’t sell out in 2002, but stay in for the recovery of 2003-2004. This takes time -- staying in touch with clients!
If you keep driving up cost and complexity while driving down revenue, we will all become order takers. Heaven help us if that happens!
I would suggest we focus on enforcing the rules we now have and get rid of the bad brokers. Improve the readability of the prospectus (i.e. put the first 5 pages in common English – cost, investment objectives, etc.; then let the lawyers write the rest). This will result in a better-informed clientele.
Then, let the good Financial Advisors make an honest living – serving the needs of their clients, without having to hire extra staff just to keep the paperwork straight.
Douglas K. Hollen (8D2A)
Frontline Financial Services, Inc.
Douglas K. Hollen
12346 Dorsett Rd.; Ste 210
Maryland Hts., MO 63043-3900
| 314-469-6501 |
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