July 24, 2009
In regard to the proposal to hit RIAs with surprise audit annually, I would find that a tremendous cost and burden and it would put me out of business. I am a one person operation since starting in 2001 and total managed assets is less than $1 million and all of my transactions go through TD Ameritrade. I do not handle any client money and each of my 4 clients gets a copy of calculations for management fees submitted quarterly to TD Ameritrade for transfer from their accounts to mine.
I am barely making ends meet and an annual cost of $8100 would be more than my $6000 of collected fees for the year and that is not counting all of the bonds, charting software, local business registration, etc that goes into the costs of doing business. I have had 2 audits from the State of Idaho over the last 4 years and that is ok. This year with the recession I lost 3 of 7 clients and
I recommend that you set a lower limit for SEC audit and still leave the small accounts (currently $25 million) to State audits. I have a good working relationship with my State but the regulations and requirements for Chief Compliance Officer etc already puts a load and burden on a small RIA operation like mine. If this goes through I won't have any choice buy close down my investment business.
Besides a detailed description of management fees to be withdrawn by TD Ameritrade, I provide them weekly status of each account as well as an annual report with description and spread sheet. I strongly request you consider a size limit or dollar value as I have no access to any of the client funds except as transferred through TD Ameritrade. I am currently retired but spend about 40 to 50 hours a week working on the investments as a little supplemental income and that figures out less than minimum wage and less than $3 an hour after my investment expenses are taken out.
Thanks for listening,
Poormans Investment Strategy
Registered Investment Adviser (Idaho).