May 29, 2013
I understand that SEC is looking for data and information on this topic but I am afraid such data and information are largely kept by entities which do not wish to be regulated by the Dodd-Frank Act. I personally know several elderly people (including some family members) who lost 50% of their savings in 2008 by holding concentrated equity-only portfolios, which had been recommended by their brokers. These elderly people consider themselves still in the middle class but in reality, they are broke and depend on their children's financial supports. The brokers they used were their friends or friends' relatives or friends' friends. It is clear that they knew nothing about the difference between the brokers and investment advisors or fiduciary duties. After they lost almost half of the retirement savings, they were told by the broker/friends that they could still sell their houses to meet their spending requirements, which was hard to do for the people in their 80s. It is clear that (i) public education about fiduciary duties is lacking and (2)more training about fiduciary duties is required for anyone who claim to be a financial advisor. Current disclosure rules on incentive fees do not sufficiently address the conflict of interests of certain type of financial advisors either. The CFA Institute's survey results indicate the vast majority of retail investors do not know or understand what standard of care they can expect from various financial services providers.
1. adopting a single, definable, and enforceable standard of care
2. establishing a consistent treatment of all individuals and firms that engage in similar activities
3. applying such a standard when broker-dealers provide personalized investment advice to retail investors
4. a fiduciary level standard that requires the duties of prudence, loyalty, and care for those who provide personalized investment advice
I strongly support applying a uniform fiduciary standard of care to broker-dealers and investment advisers who provide advice to retail customers. The CFA institute already has standard of fiduciary and care which has been accepted widely in the financial industry.