July 8, 2009
As a fee-only, SEC registered investment advisor, I am strongly opposed to the requirement that would subject investment advisors to a surprise audit. I believe this audit process would result in significant expenses for my firm and would provide little, if any, protection for my clients. To my knowledge, none of the Ponzi schemes or other highly publicized investment fraud cases involved problems with the deduction of fees from client accounts.
We use TD Ameritrade as a custodian for our accounts. This brokerage firm sends individual monthly statements for each account and provides online access for clients wishing this service.
We recommend primarily no-load mutual funds and ETFs that can be easily researched and evaluated by our clients. We send letters and reports to our clients with customized recommendations with every update, typically every quarter. Along with the recommendations is an invoice that, in most cases, indicates the fees will be deducted from client accounts. The mathmatical formula for determining the fee is clearly stated and the client has many opportunities to check the protfolio values.
I do not see how this proposal will assist my clients. The only outcome will undoubtedly be more compliance expense for my firm.
Lon L. Mishler, President