Subject: File No. 4-606
From: Joseph J McCusker, RIA
Affiliation: FPA, RIA

July 28, 2010

As an RIA I am held to the fiduciary standard of the Investment Advisor's Act of 1940. At the time of the Act, and since, brokers and insurance agents have been giving advice but are held to a much lesser standard of care for the client. The insurance lobby is most likely more powerful than me and my little business. The broker/dealer lobby is likely stronger than me and my little business. But as a result of gladly adhearing to the fiduciary standard I offer my clients something neither the insurance agent nor the broker will do today. That is, a totally unbiased, objective analysis of investment opportunities.

Why should any advisor want to give less than totally unbiased, objective analysis? Because greed gets in the way. The insurance agent tells the 74 year old widow, still grieving over the loss of her husband of 50 years that a deferred annuity is the best use of the death benefit from his company. It was right for the agent as he collected a handsome commission which did not have to be disclosed to the widow.

The broker need only find a product in his company's family of offerings that is reasonably suitable notwithstanding the fact that there are multiple better products available in the market place. Why? Because the broker gets a higher commission for selling his company's products than some other company's products.

These are examples of open conflict of interest. If, in the course of selling a product the insurance agent or broker recommends that product he is being relied upon as an advisor even if he tells the client he is not. The client has the right to unbiased advice. Simply telling the client to not rely on the recommendation from the party selling the product is not sufficient. Injustice will be perpetrated against the client as long as the seller is permitted to obtusely hold him/her self out as an advisor.

Draw the line clearly and precisely....if you offer any advice in any way you are subject to the full requirement of the 1940 Act. If, as a broker you take buy and sell orders only you are fine but if the client asks 'Should I sell?' then the answer is giving advice. If the insurance agent offers a client his company's policy that is fine but when asked 'How does this differ from other policies?' the answer to that question is giving advice.

The questions asked in these examples should be directed to a qualified, registered investment advisor/financial planner who will act in the best interest of the client. This does not have to eliminate income potential to the company but may require the client to be transferrd to someone qualified, and unbiased, to give advice. It would change the way these companies do business for the betterment of the client.