July 1, 2009
I understand that the SEC is considering this rule in the wake of last years wall street meltdown. As an Independent Advisor who custodies with Charles Schwab and TD Ameritrade I feel this rule is unnecessary and should be directed to where the problems historically have come from, Broker Dealers who are allowed to create their own statements, handle the trades, tax reporting etc.
If this rule is enacted I would likely have the following options:
1. Change all my agreements so that each client sends me a check. I already do this for some clients but it certainly adds expense and time. This may also cause a hardship for clients who only managed money is in retirement accounts. Under the proposed system they would then have to take a taxable distribution in order to pay me.
2. Keep my business as usual and comply with the audit. This will likely cause me to either raise fees, earn less or decide to exit the business and go work for a broker dealer where exotic investments and many of these problems started.
The small advisors will have a hard time complying, the large broker dealers would not and would thus benefit again at the investors expense. When I submit fees to Schwab or Ameritrade they do check to make sure the fees seem reasonable, the client is sent a notice/bill by me and is notified by Schwab on the monthly statement.
I'm just one small state registered advisor but please consider how we and our clients will be impacted by this rule.
Donald F. Dempsey, Jr., CFP®, CMFC®
Dempsey Investment Management, LLC
A Fee-Only Financial Planner and Investment Advisor.