February 7, 2005
I was a CPA long before becoming a CFP and registering as an investment adviser. I decided to become an investment adviser after witnessing many of my tax clients suffering unethical practices at the hands of their trusted advisers.
Some examples include variable annuities inside IRAs, clients investing 500,000 at one time and being sold B shares as commission free investments, etc. These trusted advisers certainly were not very trust worthy.
Before registering as an Investment Adviser, I was a Registered Rep. I wanted to work with my clients on a fee-only basis, but it soon became apparent that my broker dealer was only interested in having me and my clients invest in their preferred provider list of mutual fund companies.....oh, and by the way be sure and get your insurance licenses so you can sell annuities.
The Broker/Dealer community wants its cake and eat it too. The consumer has been educated to look for a fee-only adviser. This is due to the fiduciary relationship that comes with an investment adviser and the reduced conflicts of interest from charging fees vs accepting commisions. The Brokerage community has muddied this distinction with their fee-based programs. I have witnessed examples of CFPs charging their clients a 1 percent fee and then putting them in B and C shares. And, no the fee was not reduced by the commissions received. While the clients were told thay might be subject to a surrender charge, they never understood that their trusted adviser was double dipping them in terms of compensation.
The American consumer has the right to expect, and receive a fiduciary relationship from anyone that provides more finanical advice than buy this or sell that.
As the New York Times put it, if the business card reads anything other than Stock Broker, then make them register as investment advisers.
I trust you will do what is right for the American people.