July 30, 2009
Regarding the rule proposing surprise audits, as a one man RIA I'm all for it and have no problem submitting to such a requirement PROVIDED I DO NOT have to bear the cost of such an audit. The fact is I'm a Fee-Only financial advisor and I DO NOT take custody of client assets. I do however debit my planning and advisor fees from my clients accounts held at TD Ameritrade.
I've seen estimates anywhere from $8,000 to $24,000 for the cost of such an audit. An expense like this could potentially put me out of business as things in this market environment are difficult already just to make a living. Please consider carefully who has to pay for this audit expense - why wouldn't it come from the taxpayers whom it's supposed to protect? What about an annual fee charged by each custodian that goes into a pool to fund such audits of the custodians' RIA's that is in turn debited from every client account? There are many solutions out there that would NOT put a small one man RIA like me out of business.
If the costs are NOT billed to the RIA - as I said I'm all for it, it's not the audit I have the problem with or even the time it would take away from work (I'm willing to sacrifice the time for the sake of the greater good) - it's the costs associated with it and the fact that you will be substantially hurting many small RIA's like myself and potentially putting us out of business.
Greg Phelps, CFP®, CLU, AAMS
President & Financial Advisor
Red Rock Wealth Management, LLC