August 25, 2010
This topic is critical for my profession, my clients and the market as a whole. It is extremely confusing for the public when dealing with securities representatives to understand what the levels of care really mean. I believe that the fiduciary standard is really what is needed for anyone who makes securities related recommendations. There really is a significant difference between the fiduciary standard and the suitability standard, but the advice which is being given covers the same range. I believe that the suitability standard should only apply for brokers who are receiving "unsolicited" orders. Anyone who makes recommendations of securities should be held to a fiduciary standard, so as to preclude on hiding behind the phrase, "well, it was a suitable investment.", even though it might not have been in the clients best interest. And therein lies the problem. It truly is the difference between being suitable as opposed to being right
I also believe that there exists a gap between what one can call themselves and what they are legally allowed to transact. There are insurance only licensed agents who call themselves 'advisors' and who make recommendations on selling securities in order to fund an annuity or life insurance policy and when the state is made aware of the potential problem of giving securities advice without being licensed, the response is that they sold a product for which they are licensed without any consideration for where the monies came from or what advice was given to make the transaction.
I believe that for regulation to be effective, it must cover anyone who interfaces with the public on financial matters. The banking industry, as an example, is highly regulated as to what they may sell or even say to customers. Anyone who holds themselves out as a banker must perform to the set standards or be in jeopardy of violating the banking regulations. This same type of oversight should be used in the financial services industry. If you hold yourself out as an advisor, or if you are giving advice to the public about financial products or services, you should be held to the highest standard available - The Fiduciary Standard. This will level the playing field from the standpoint that the public will know what to expect, with relationship to standards of care, if there is only one standard to measure against.
It is time that the confusion, the subterfuge and the ability to avoid responsibility for advice be removed from the financial services industry. Please move to set the standard for anyone who works in this industry and offers advice to the Fiduciary Standard.
Thank you.