August 31, 2004
I am troubled that a rule exempting broker-dealers from the Investment Advisers Act of 1940 when offering fee-based brokerage programs is being considered. It merely creates two different standards of conduct for persons offering financial planning services--we, as RIA, would be held to a higher fiduciary standard than broker-dealers under NASD suitability rules. The rule also exempts brokers from being required to disclose conflicts of interest in connection with the offer of financial planning services.
I urge you to totally withdraw this rule proposal, not amend it, in the interest of the consumers of financial advice. It is obvious from recent developments in the investment community that more needs to be done to prevent abuse in our industry. There are many subtle ways to overcharge clients without their knowledge and they must receive maximum protection.