March 17, 2004
As a Branch Manager with over 17 years of experience, and having sat with many a client, I can honestly say that this is just a significant waste of time and money.
The typical client that buys from a Broker will not take the time to read this disclosure, nor if read, will they fully understand the impact. Worse off, the brokers that you are trying to prevent from doing unethical things by requiring this disclosure, will only find ways around having the client read anything. This leaves the ethical brokers running around spending more time trying to comply with regulations and spending less time helping clients.
What our industry needs to focus on is better training, education and ethics and perhaps raising the bar in terms of who should be allowed to advise others on how to invest thier hard earned money. In our business, all you have to do is pass the Series 7 and like magic you are a broker.
The majority of clients just want to be taken care of. They do not want more paperwork, forms, disclosures and issues to deal with. This crazy Privacy Act has driven that home. How many of us actually READ all of the Privacy Act disclosures that all of our financial relationships send to us? -- Darn few.
Investing is already a very difficult task. Disclosing fees in dollar terms to a prospect my very well back fire and cause someone who shoud invest, not to, because of the fear that they are paying too much.
This begs the question of how much is too much? Are all brokerage products a commodity that can be purchased anywhere? Is every broker the same, or is there a real value added? I admit, there are too many cases where the value added does not exist. But I feel strongly that there are a good number of reputable brokers who do the right job for thier clients and who do earn their commission.
If this requirement goes thru, will the Banks have to disclose thier profits in dollars on a loan or savings account? Will car dealers show their revenue as well?
Then there are the service centers, Midas Muffler, STS Tire, Sears.... will they all have to disclose how much each employee gets paid to put on your tires? How much is too much and is this really necessary?
I can only tell you that in dealing first hand with clients, they are confused. After many hours in a conference room disclosing ALL of the material we already have to disclose, clients eyes just gloss over. They simply cannot take it all in.
The bottom line is the we need better brokers. Ethical bokers that are better trained and have experience are the only safe haven for investors. Buying the cheapest mutual fund isnt always the right answer. How is a client to know if they are comparing apples with apples?
We already spend 25 percent or more of our time on compliance related activities. If we keep coming up with more and more disclosures and regulations, there will not be any time to meet with clients to discuss their needs, review assets and solve problems.
The solution is better brokers, not more disclosure and regulation.