July 2, 2013
I hope I have used the right format to comment on the fiduciary standard.
I believe it is compatible with the SEC's overall goals to have two different standards, as currently exist. As a State Registered RIA firm, I think I provide a higher standard of care for my clients than a broker who only has a suitability standard does. I don't think they (brokers) should have to change their business model.
Despite being a member of industry groups who favor a uniform fiduciary standard, I don't believe that is practical without eliminating the brokerage industry, or watering down the definition of what it means to be a fiduciary, thus eliminating the adviser profession.
I don't agree with the argument that brokers put forth, that a fiduciary standard puts advice beyond the reach of most investors. My practice is centered on the middle class, and I can offer investment advice and financial planning at a reasonable cost. In fact, I have clients who have chosen me because my services are less costly than paying the commissions on Class A mutual fund shares and their associated 12b-1 fees, sold by most brokers. But this particular argument being wrong is not reason enough to dismiss the desirability of 2 different standards of care.
Those consumers who know the difference often choose a fiduciary. Some are fine with the protection offered by a suitability standard. I don't think a commissioned based model is THE best for investors, but the model is not in and of itself, evil. As long as brokers and advisers are required to inform investors about the standard of care under which they operate, I think the SEC will have done its job, and investors who are informed will be able to make their own choice.
And of course, making sure that unscrupulous brokers and advisers are found out, punished and banned from the industry entirely, is paramount to serving the needs of the investing public.
Randall R. Wall, MBA, CFP®
Certified Financial Planner™ Professional
Penn Cove Financial, LLC