August 26, 2010
I am writing to oppose the SEC from Imposing a misguided Fiduciary Standard on Registered Representatives. What the general public doesn't know or understand is that registered reps are heavily and consistently regulated.
While I can't speak on behalf of all registered reps, and I can attest that my broker-dealer has a heavily-enforced standard with respect to suitability. I have experienced instances where business has needed further details in order to pass suitability. In no way does my broker dealer rubber-stamp applications. I also know the company has also taken action against less than a handful of reps who haven't followed their standards.
I also know that Princor spends a lot of money on compliance each year. If another lay of regulation would to occur, it would only result in an increase in the cost of compliance, and would likely result in greater investment expenses to the client. It could also result in a reduction in the options available to clients, simply to save money. Having more investment options available creates a better environment for the client.
I am confident few (if any) of my own clients know how much we are monitored. This includes annual face-to-face compliance meetings, annual reviews, reporting requirements, and continuing education, not to mention preparation time. I can't give you an estimate as far as time is concerned, but it's significant.
What I'm most concerned about is the fiduciary duty aspect. Will this force us to be fee-based advisers? Would that be appropriate for every person? Is the cost justified to investors with smaller amounts of money? If passed, the Dodd-Frank Act cannot guarantee results despite the advice given. As it current stands, I believe that an extremely high majority of registered reps operate under the standard "to act in the best intereste of the customer without regard to the financial or other interest of the broker, deal, or investment adviser". I don't even know of anyone personally who does.
As registered reps, we attempt to provide the best solutions possible given a clients needs and objectives...and we're required to complete extensive training to address those needs. The problem with implementing legislation is that there is no perfect solution in the financial services industry, given the changing value of the stock on a daily (and minute-by-minute) basis, and the changing needs and situations that clients experience in their lifetime. There's absolutely no method to agree on what is "best" for a client. While not every client is going to purchase exactly what they might need, our industry can only utilize the process of asking questions and pairing up those needs based on the current circumstances at the time. That's the best practice a registered rep can take and should be the only standard we are held accountable for.
Finally, how does the SEC decipher information from the general public? Whose to say a large majority of the respondents are simple people who like to complain or want to cause a stir? Does is represent individuals of all ages, demographics, financial status? If the study is only conducted for 30 days, it will hardly respresent the diversity of individuals that exists but might not respond.
In closing, I feel it very important to protect consumers. However, I hope the SEC has the wisdom to understand and acknowledge that imposing a legal fiduciary duty on all BD's and their registered representatives is not needed and will create a landscape where lawyers attorneys seek out lawsuits against investment companies and their employees like ravenous wolves.