April 28, 2018
S7-08-18 S7-08-18 Comments on this proposal by
Craig Martin, MSFS, CFP®, ChFC
DIVERSIFICATION IS YOUR ONLY SAFETY
Fax to Email: [redacted]
10 S. Almaden Blvd., Suite 1250
San Jose, CA 95113
Family Wealth Consultants, Inc., A Registered Investment Advisory Firm
View the Video: What It Means To Be A Fiduciary
This proposal is a classic example of government trying to run an industry. History is replete with failures of those attempts, even if well intentioned. Keep in mind that we have a distinction now, in the law, giving the consumer choices between sales agent and fiduciary advisor. If you are asking, it is the 33 and 40 Act. We just need the freedom and ability as advisors to effectively describe it so the public understands those important distinctions. Your desire to do it for me is mostly going to fail, probably for many reasons, but in this particular case because you have imposed it on me with what appears to be a tilt towards promoting the sales agent over the fiduciary advisor. You have not been able to (or choose not to) effectively describe those differences.
I have a Master of Science of Financial Services degree which represents my professionalism of being educated so I can better advise my clients. It is a master of science degree in coordinating estate and income tax planning with investments and cash flow. In addition, I have many designations (CLU, ChFC, CASL) and marks (CFP) that I have earned in an effort to gain the knowledge necessary to be of professional advice and guidance for my clients in all their financial choices. My wife and I run the business and she has the same educational degrees and undergraduate titles. We are both dedicated to the education required to be professionally available to our clients in all the situations they face in life.
Your CRS has NO recognition of this critical achievement, which could be raised to a standard in the profession, in helping clients make independent and informed decisions regarding the many financial choices they face in life.
Peggy and I have given up our SEC licenses to receive security commissions (#6, #7 and #26) so we can dedicate ourselves to a fiduciary standard that allows us to always be available to meet our clients needs that is not conflicted with sales and award trips. We know our clients continue to hire us over many decades because we earn our fees with expert advice at the moment it is needed. There is no way to monitor the importance of those individual and personalized events until they happen which usually means that the importance to our client is only recognized after we solve their issue - together. The advice we offer covers a huge list of life events, including but not limited to personalized legacy letters, intergenerational planning for families as well as family business continuation, elder care planning for clients and their parents, tax planning, cash flow management, estate liquidity and income replacement. Your CRS implies my dedication to a fiduciary responsibility to my clients is only about portfolio monitoring. What a shame Sounds like you think investments are all I do or even what my clients care most about.
This proposal does not convince me that you recognize what we do. Maybe it is because you have not personally hired a fee only advisor or maybe it is because you dont want the public to recognize the true importance of what a fiduciary really does. The way this CRS is written it seems to be the latter because it looks to me like you were directed by a sales agent company officer on how to describe what I do. Peggy I would surely quit this wonderful and rewarding business if monitoring portfolios was all we did for clients.
Your CRS does not distinguish our professionalism and seemingly limits my potential to effectively describe it.
As just one example of why this CRS is doomed to fail, this CRS allows weasel language for the sales agent to defend themselves that could legally absolve them of responsibility. In particular, the wording in the Relationships and Services section gives brokerage firms language they can point to in any arbitration hearing: it was clearly disclosed right there in the relationship summary that our sales agents were merely making suggestions, and it was totally the decision of the consumer to buy those equity-indexed annuities with 15-year surrender charges. You have offered a key to the hen house for the wolves.
The best part about this proposal is that it has the intention of giving the client some reading material that is designed to create distinctions between fiduciary and sales firms. However, it fails because it implies my fiduciary responsibility is limited to monitoring portfolios. This proposed CRS has the potential to be very informing to the public looking for choices except that the verbiage in this document is heavily tilted towards promoting transaction over fee only. This proposal misses a great educational opportunity for the investor because this document seems to be written by a maid servant to the sales agent.
This CRS imposes on me to disclose as an advisor that I have limited investment choices compared to a sales agent. I seriously and professionally challenge that statement. I have a multitude of examples proving that product sales (of many products) produces an entirely different risk-managed portfolio than what we create for our clients. This is not the place for me to give a masters class on how Harry Markowitz, Nobel Laureate taught us to mix dissimilar price movement asset classes, but readers of your CRS are told that the number of investments from a sales agent is a benefit that the advisor doesnt offer. That is a false representation of effectively risk managed portfolios. I am tempted to tell Harry about you.
A HUGE missing component of your proposed CRS is proper and full disclosure of legal and regulatory problems. These need to be listed in detail and explained in simple language so the investor can understand the complexity and serious nature of these issues that are directly involved with their personal financial well-being. THE REASON Peggy I left the brokerage world was because of our integrity, ethics and personal peace of mind. The crimes against clients just didnt stop (and havent yet) at brokerage firms so we gave up trying to explain that we didnt do those crimes. We became defensive and felt ultimately damned because others in our brokerage company were continuously committing crimes. The public needs a full explanation of how this LONG list of crimes at any (most?) firm(s) affect their financial future. If we live in a rule of law, those who break the law must be fully disclosed. Otherwise, dont bother with the laws.