July 5, 2013
Thank you for your diligent work on behalf of the investing public, helping to create an environment most conducive to informed, knowledgeable and properly regulated investing. In that regard, a uniform standard of care - the fiduciary standard - applicable to ANYONE providing investment advice to a non-financial professional, retail consumer, about to buy securities is HUGELY critical
Such a uniform standard lies at the heart of a consumer's properly informed consent to purchase securities. Absent such a standard, a consumer is far more likely to fall prey to those whose interests ARE NOT properly aligned with the consumers' best interests, resulting, more likely, in a substantial investment loss. I know. It happened to me in the late 1980s, in my mid-career as an architect.
Ignorant of virtually everything about investing in securities, I was encouraged by a broker to put a five digit dollar amount into a real estate limited partnership, the first investment in a security of any kind that I had ever made. Within two years the investment was worthless.
In the circumstances leading up to my investment, all I knew was that I was dealing with a trusted person with whom I had taken my first insurance policies. Surely, he was looking out for my best interests, or so I thought. But little did I know that my interests were NOT mandated to be his first priority. Furthermore, I knew nothing about the different regulatory standards that applied to advice rendered by a broker vs. that of an Investment Adviser, and I was NOT told of such difference during his warm and fuzzy sales pitch.
In the many years since my own ugly learning experience, I've come to know that almost no non-financial professional knows what the fiduciary standard is I've even talked to some writers in the financial press who didn't know about it or its importance.
I'm deeply puzzled that after all this time there's still debate on this issue. A cost-benefit analysis of a uniform fiduciary standard for investment advice to a prospective consumer of securities? GIMMIE A BREAK
How do you propose to account for MY COST - the very likely cost to ANY such ill informed consumer basing his or her decision on potentially misplaced trust?
Look at it from the other side: Why should there NOT be such a uniform standard of care? Surely, THAT is the most difficult question when asked from the consumer's perspective - the perspective that should be YOUR primary one
The realists among us, especially those of us once burned and twice wary, know the answer to that question straight away, without any cost-benefit analysis The answer is that a fiduciary standard applied to the investment advice rendered by a broker will further complicate and encumber the sales process (Oh, no We can't have THAT) As one broker said when speaking at a seminar of financial planners in response to a question about whether or not his product was really right for the investor, he said, "Hey, folks: You gotta sell what you gotta sell."
So, whose likely "costs" and whose "benefits" are you considering in your analysis? Something deep down tells me that I know whose costs and benefits you're being PRESSURED MOST to consider And they're NOT those of the non-financial professional looking to buy securities in the ever more critical process of building a retirement next egg.
Please, dear friends at the SEC, step up to this utterly and vitally important challenge and set things right for the investing public
Sincerely and hopefully,
James A. Stehr, AIA