Subject: File No.
From: Anonymous Anonymous
Affiliation: Compliance Officer

June 12, 2017

June 12, 2017

Public Comment Concerning the DOL Fiduciary Rule

I believe the DOL fiduciary rule is bad for investors and the industry for the following reasons:

a.Greater cost to the investor long-term: In my opinion, it is better to pay the commission or load upfront and be done with it than to pay a perpetual fee on the investment. If a broker dealer rep must act as a fiduciary for retirement accounts, the broker dealer rep will be acting as an advisor and charge advisor fees. The fees charged to the investor on the investment will be perpetual and will likely be very costly for the investor who holds the investment long-term. Although, I do use an investment advisor to manage some of my investments, I do so because it gives me an individual to bounce ideas off of and to get a second opinion on the investment decisions I make. However, in my early years of investing in mutual funds and stocks, before I became experienced in investing and built up my portfolio, I would pay an upfront load on the purchase of a mutual fund or commission on a stock purchased. Now, once that load or commission is paid, no other commission or load is charged on the investment, other than the asset management, 12b-1 and other such fees, which are typically small fees. Once the load or commission is paid, investments are free of such fees and can benefit from the growth of the investment. When a broker dealer rep is now forced to act in the capacity of an advisor under the fiduciary rule, over the long run, the investor will pay more in fees, as the asset management fee is a perpetual fee charged until the investment is liquidated and paid out in cash to the investor. In addition, my guess is that small investors will get tired of paying these perpetual fees on their small investments and end up cashing out their investment and placing the funds in a bank CD making less than 1%, which would result in negative returns when considering inflation. Inflation for retirees is much higher considering the needs of retirees and seniors. The investor will ultimately pay a greater price due to lost opportunity.

b.The Small Investor Loses Out: Small investors will lose out due to the DOL Fiduciary rule, because broker dealer reps and advisors may not want to put themselves in great liability and potential litigation and the time commitment to act as a fiduciary for small investors. The advisors will likely focus more on the higher net worth individual, leaving the small investors to those unscrupulous bad actors that sham and steal from investors. Those that you can watch on American Greed. The investor loses out because of lost opportunity of investing with a real advisor. Then there is the loss should they seek someone else and end up with one of those bad actors, like in American Greed and lose everything.

c.High Cost to the Industry: Very costly to the broker dealers to service investors, due to the extra burdensome regulation, greater compliance burdens and more legal liability to financial advisors which increase the cost greatly for compliance and operations. This has already resulted in job losses in the industry. The final cost of all this will be loss of jobs, firms closing or changing their model which will increase costs. These costs will likely be passed to the small investor in the form of high advisor fees.

d.Lost Opportunity: The DOL identifies that some investments, such as alternative investments, are not acceptable for investors. This is silly. Bureaucrats are not advisors and they do not know what is best for the investors. This should be determined by the advisor under FINRAs Know Your Customer rule. Through a suitability review the advisor can determine which account would be appropriate for the investor and which type of commission or fee paid would be best for the investor. Although the DOL is allowing some types of investments under the best interest contract exemption, this puts the advisor at great risk should the investment not pan out. To avoid the added liability, frivolous litigation and the bureaucratic process, in this instance the advisor may possibly choose something else that may not be as beneficial to the investor.

e.Two systems is burdensome: Having two different systems, one for retirement account and one for all other accounts, is confusing to the investors. Clients with multiple accounts will be subject to multiple regulatory rules. This only adds to the burdensome costs of the rule, as well as to the confusion. There should be one standard for all accounts.

In my opinion, the Obama administration rushed out and passed the rule, like it did with many of its decisions, just for the sake of passing a rule and growing the size of the government. I believe the SEC needs to be the focal point on this, since the investment and financial expertise lies with the SEC and not the DOL.