August 25, 2010
I am in favor of retaining the "suitability" standard for agents and brokers-dealers. Proper treatment of the client always has and always will be a function of the advisor's integrity.
Broker-dealers and agents have numerous exposures to oversight by FINRA, the SEC and company compliance officers. In fact, I believe our compliance oversight is already double that of fiduciaries. We do not need another layer of oversight and we do not need more hoops to jump through to conclude a transaction. Additionally, a never ending list of requirements increases the possibilities that a mistake will be made, even if by innocent omission. That then gives rise to unnecessary litigation and a "chill" on the industry.
Lastly, I fear that imposition of the fiduciary standard only will eventually lead to the outlawing of commissions. If this happens, and fee based planning is the only option, millions of middle class Americans, who are not used to and will not pay fees, will be deprived of good advice and products.
I have practiced under the suitability standard for 41 years with about 2000 clients. A review of industry complaints, in general, would indicate that a significant problem does not exist with the "suitability" standard and the Bernie Madoff case certainly indicates that a "fiduciary" designation does not insure fair treatment to clients. If additional disclosure is merited, fine. But do not eliminate the suitability standard in favor of the fiduciary standard alone. Thank you.