Subject: SEC and public comments on DOL rule
From: John Signorotti

June 2, 2017

I have been in the advisory business about 31 years.  I think Fiduciary Rule is fine, but I admit, I have a problem with Robo-advisors. 

The general public is extremely naive, and generally ill-equipped to sort through the financial advice options.  When an advisor, live human, asks questions, we get  a sense of the fear, the greed, the conviction, or perhaps utter confusion as to the subject.

You have clients who say on one hand, they want to invest like Warren Buffet, and then on the other hand they tell you they can not tolerate loss of principal.  Many clients just do not understand.  They need a live human to explain the various moving parts to the process, like risk and reward and so on.

Often the professional advisor simply has to save investors from themselves.

Along these lines is the issue of "no load" products.  Almost 100% of clients think "no load" means free.  They nearly always believe that "load" has to do with fees or commissions.  They actually think firms like Fidelity work entirely for free.

I have counseled probably well over 10,000 people.  While smart in many areas, lots of these clients are dumb, financially dumb.

The entire industry needs radical transformations.  Below is how I would change things.  We would have an awesome profession, but many ticked off people, because their special interest would be removed.

1.  Every product has a professional advice fee of 1%, charged annually.  The no load industry is outlawed! 

2.  Robos must charge 1% professional advice fee whether or not a live human is involved.

3.  No product has a fee greater than 1%

4.  All professional advisors must at a minimum possess a 4 yr. degree from an accredited college, including all licensed professionals affiliated with a robo platform

5.  products include all those covered by life insurance license and Series 7 and variable contracts license.

6.  All professionals must do 30 CE hours every two years at a minimum including all professionals associated with robos.

These rules will weed out the bad reps.  Clients can still choose to not use an advisor but they still pay the professional fee.  This will incentivize clients to work with a professional, who is educated, and not making commissions off of a sale.  There are no more sales.  Only advisory fees.

These rules work for qualified plans as well as non qualified investments.

John Signorotti, CFP, ChFC, CLU
Investment Adviser Representative