Subject: File No. 4-606
From: Gary L. Braden, Mr.

July 30, 2010

I think it is important to make a distinction between different types of broker/dealers and the clients served and products used versus a registered person that works on a trading floor and does not have the same depth of relationship with their clients.
In the past I was the Senior V.P. for a independent broker with one of my functions managing the firm CE program. At the time I was also a member of the Financial Planning Association and having attended several of their annual get togethers was not impressed. Attendees seemed to have one or more of 3 basic agenda items... #1 looking for a new employer #2 recruiting new advisors/RIAs #3 obtaining some of the required education requirements for their CFP designation.
During the FPA conventions my firm's attendees made it a point to mix in with different groups of attendees during breaks and other down times and I was clearly not impressed by the level of knowledge of RIA attendees I talked with. The majority of the education sessions we attended were very shallow in content and in some cases contained serious errors versus tax law or regulatory standards.... or maybe it is nothing more than RIAs that are not registered persons donot have to live up to the same rules/standards as a registered person.
When talking with their clients or prospects the RIA discussion "points out" that by charging a fee it puts the advisor on the same side of the table as their client with no hidden agenda or conflicts of interest. At the same time in every professional journal/magazine for the RIA industry they all talk about how once they get through the transition the "cash flow" becomes much more stable and grows consistantly versus when they were paid commissions. Anyone doing simple math can clearly see that fees quickly cost the client more than commissions (including breakpoints) AND NEVER STOP unless the client goes somewhere else and pays a new RIA their fees. Those fees are taxable withdrawals versus one time commission charges with small trailing fees for servicing that client that are part of the purchase price and on going operating expense so are not taxable to the client. I wonder how many RIAs can pass a series 7 or series 24 regulatory education session or if they have a formal firm education program and when was the last time a regulator inspected their operation versus the process independant broker/dealers and their registered persons go through.
Where I come from one describes "ethics" or fudiciary responsibility as doing what is right even though no one is watching or will ever check up on what was done.
Many registered representatives deal with clients that RIAs with their minimum asset requirements would never talk to let alone work with and by charging commissions versus one percent fees (or higher) those registered persons actually serve those clients for a much lower long term client cost.