August 3, 2018
To The Honorable Chairman Clayton,
I appreciate the work you are doing on creating an SEC rule to protect consumers of financial advice. I'd like to express that while I think merely taking on this task is a great start, I don't think the current draft does enough to clearly differentiate between advisors and brokers, especially Fee-Only advisors. As a member of NAPFA (National Association of Personal Financial Advisors), I have chosen to:
· Minimize conflicts by only receiving compensation from client fees; I do not accept commissions or other third-party payments in connection with my recommendations.
· I do not sell products, proprietary products, or engage in principal trading.
· I am hired to advise clients and am trained in finance and in advice, and have the CFP® designation. My fellow members have the CFA and CPA designations.
· As an RIA, I render fiduciary advice in intimate relationships of two; brokers can only offer incidental advice in sales relationships of three.
· My investment product recommendations are wide and deep and not limited.
· The fees and the underlying investment costs clients pay are transparent and clear. I offer estimates and quarterly reports of clients' fees and expenses. There is no confusion: My clients know what they've paid and what I've earned.
· If I have any material conflicts, they are clearly listed on my ADV.
My admittedly lofty aspiration would be to create a profession on par with doctors, lawyers and CPAs. This would actually be above and beyond the proposed rule and perhaps even the 1940 Act. This profession would look much like the NAPFA bullets above combined with the CFP Board of Standards.
For that reason, anything we can do in the meantime to professionalize is a win. The proposed rule offers an opportunity to do this.
The premise of the proposed rule, clarifying consumer choice, is spot on. For that reason, I believe:
· hybrid advisors should be disallowed. This ability to "switch hats" is the antithesis of clarification for consumers.
· Brokers should have to expressly state they are in transactional sales, including via their title, and not advice. This is more stringent than disallowing them to use the term "advisor".
Again, I appreciate all of your effort spent on this rule and look forward to seeing the next iteration of the rule.
Best,
Robert Lindstrom, CFP®
Financial Planner