July 29, 2004
re: File No. S7-25-99, Certain Broker-Dealers Deemed Not To Be Investment Advisers
To whom it may concern,
I disagree that broker-dealers should be allowed to essentially act as investment advisors while not being covered by the Advisers Act. When broker-dealers provide advice to clients on either a fee-based or percentage of assets-managed basis, clients have the impression that they are getting unbiased advice. In reality, the broker is still fundamentally acting as a sales person, and not necessarily in the best interest of the client. I am aware of the qualifying conditions for exclusion from the Advisers act per this proposed rule (i.e., providing advice on a non-discretionary basis, making sure the advice provided is solely incidental to the brokerage service, and disclosing to customers that their accounts are brokerage accounts). However, I don’t think that any of this does anything to either a) notify the customer that they are essentially dealing with a salesperson OR b) educate the customer as to the nature of this “incidental” advice for which the customer is paying extra fees above the traditional brokerage fees. In other words, under this rule clients will think they are paying extra for unbiased advice that supports their fiduciary interest, when in reality they are paying extra for advice from a salesperson.
In summary, I think this proposed rule is not in the interest of consumers, and I support the lawsuit filed by the Financial Planning Association challenging this rule.
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