August 26, 2004
SEC Broker-Dealer Rule Exemption
I urge the SEC to WITHDRAW, not amend, this rule proposal. The proposed rule will be harmful to consumers by creating two different standards of conduct for persons offering financial planning services: a higher fiduciary standard for registered investment advisers and a lower one under NASD suitability rules. In reality, this should be the other way around you have exempted the very class of people who need to be regulated. The rule also exempts brokers from being required to disclose conflicts of interest in connection with the offer of financial planning services.
Allowing brokers to infer that they have a fiduciary relationship to a client, when in fact they do not, is the kind of thinking that has caused so many scandals in our profession and undermines public confidence in financial advisors.
Those who actually accept fiduciary responsibility and act as agents of their clients ought to be clearly differentiated from salespeople who are beholden to a wirehouse or other financial institution. This rule will subject fee-only financial planners, even those whose compensation is calculated HOURLY, to stronger regulation than that of commission paid brokers. Surely you can see that this regulation is ill conceived