July 20, 2018
To whom it may concern,
I am writing to express my concern that the SEC’s best-interest proposals, ostensibly written to help investors discern the differences between brokers and advisors and avoid the cost of conflicted advice, falls meaningfully short of achieving this objective and in fact will obfuscate the important distinction between a broker and advisor.
I have been in the financial services profession for 42 years. I have carried insurance licenses for nearly all of this time period. I also held Series 6 and 63 securities licenses. In addition to selling life insurance (both fixed and variable) as an agent, I also served as the Vice President of Life Insurance in a fraternal benefit society and as the President and CEO of a boutique mutual fund firm that held just under $1 billion in assets. Since retiring from a senior management position in a diversified financial services company in 2008, I established my own RIA and for the past eight years have offered comprehensive financial planning services on a fixed or hourly fee-only basis. My firm does not sell any products nor do we receive any payments from third parties.
Given this diverse vocational background, I believe I am uniquely qualified to speak to the important distinction between an advisor and broker. Although I always felt a compunction to act in the best interests of my client, an honest response is that I was always cognizant of the commission schedules that accompanied the sale of a proposed product. I was also aware of the cumulative year-to-date commissions generated and the number of additional sales that were required to qualify for a sales incentive and or bonus commission. Having been in a senior leadership role in a financial services company, I am also well aware of the motivation behind incentives that drive a producer to focus on products that were most profitable to the company. That’s the way the system works. It’s also a business model of delivering financial advice that is fraught with conflicts of interest.
In my financial planning practice, I have directly observed the end result of a product portfolio that was constructed by a broker (often masquerading as an “advisor”) who was not legally obligated to put the client’s interests first. When I have been asked to give a “second opinion” on their financial plan, I point out the cost of a 1% trailer fee from a “C” mutual fund share or the high commission that accompanies an equity index annuity. When I inquire whether the client read all of the disclosures that accompany the expensive product sale, they simply respond that “I thought my “advisor” had my best interests at heart”. This is the reality of the marketplace today and reflects the incredible naiveté of the average American consumer of financial services products. Employing the disclaimer that “we will fully disclose all conflicts” falls on deaf ears. Clients do not have the ability to understand the disclosure material that is still written only by and for lawyers.
I respectfully request that any new regulations promulgated by the SEC make a clear and distinct difference between a broker and advisor. Only then will the client be able to truly discern what is in their best interest.
Sincerely,
John L. Liechty, CLU, ChFC, CFP®
Integrated Financial Planning Solutions, LLC
203 S. Main St.; Suite 2A
Goshen, IN 46526